This makes for some interesting reading…
NEW Zealand’s economy has slipped into a recession for the first time in a decade, official data shows.
The decline in second-quarter gross domestic product data signalled further aggressive interest rate cuts by the reserve Bank in coming months.
Statistics New Zealand said production-based gross domestic product shrunk 0.2 per cent in the three months ended June 30, after it contracted 0.3 per cent in the first quarter.
“The last time there were consecutive quarters of decline in economic activity was the three quarters ending March 1998,” the statistics bureau said.
The quarterly figure compared with the 0.5 per cent contraction forecast in a Dow Jones Newswires poll of 12 market economists. The Reserve Bank of New Zealand had forecast the economy would contract 0.2 per cent.
The statistics bureau said GDP grew 1.0 per cent on the year, compared with the 0.6 per cent expected by economists and the first quarter’s 1.9 per cent growth on the year.
While the data is slightly better than most economists were expecting, it still shows a contraction and confirms that the economy has been squeezed by a combination of high interest rates and rising food and fuel prices crippling consumption. Drought conditions and a sharply slowing housing market added to the misery.
The weak economic picture, coupled with offshore financial turmoil, should keep on track market expectations for the Reserve Bank to continue its aggressive easing cycle.
Earlier this month the central bank slashed the Official Cash Rate by a bigger-than-expected 50 basis points to 7.50 per cent in a bid to engineer a quick recovery from the recession.
High interest rates and the rising cost of living continued to cool private consumption expenditure growth, which contracted 0.2 per cent, compared with a 0.4 per cent decline in the previous quarter.
The Reserve Bank and most economists are tipping the economy to show a further contraction in the third quarter.
Several economists are now expecting the Reserve Bank to ease by another 50 basis points at its October 23 Official Cash Rate review.
Sourced from The Australian Business
But this does not mean the end of the line by no means. We are still in a relatively good space at the moment and as the OCR continues to fall and world markets start stablising we will be back on a high.