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But given high levels of population growth, the past two years have been recessionary on a per capita basis.
“The [third-quarter] GDP figures are expected to confirm what we already know: restrictive monetary conditions over recent years have weighed heavily on economic activity,” said ANZ economist Henry Russell.
But the easing cycle was well under way, with the RBNZ delivering 125 basis points of cuts since August, so the quarter may well mark the bottom of the economic cycle, he said.
Lower interest rates and easing credit conditions were paving the way for an economic recovery, Russell said.
“High-frequency indicators are already signalling the economy is responding, with confidence lifting, the housing market showing signs of life, and activity indicators having bounced off their June lows,” he said.
“This recession was caused by high interest rates, so lower rates are likely to be an effective cure, but not an instant one, and there remains considerable uncertainty surrounding the pace of the recovery.”
Westpac senior economist Michael Gordon described it as “a last gasp” of recession.
“Whatever we get out of Thursday’s figures, there is growing evidence to suggest that we’re now past the worst of it,” he said.
The biggest negative contribution was likely to come from non-food manufacturing, with a 4% decline, he said.
“While the manufacturing sector has been under pressure for some time, this fall overstates the case – it reverses the 4% gain that we saw in the June quarter, which was wildly at odds with the other indicators for that sector.”
The same was true to a lesser degree for the expected declines in construction and professional services.
“Both of these are sizeable sectors that have seen substantial job losses over the last year or so, according to the Monthly Employment Indicator,” he said.
“They proved to be surprisingly resilient in the June-quarter GDP figures, so the large declines that we expect for the September quarter are a correction of this.”
Other notable points of weakness would include wholesaling, retail and accommodation, and electricity.
On the positive side, the strongest contribution was expected to come from agricultural output.
“Milk collections started the new season very strong, and while the September quarter is far from the peak in absolute terms, this translates into a strong rise in seasonally adjusted terms,” Gordon said.
“Forestry also saw a strong rebound in the September quarter, after a sharp drop in harvesting in the June quarter in response to a fall in export log prices.”
ASB senior economist Kim Mundy also picked a 0.4% fall for the quarter but warned there was a large degree of uncertainty surrounding the estimate.
“The annual benchmark revisions are applied to GDP in the third quarter of each year,” she said.
“We were forewarned by Statistics NZ that the level of GDP on a production basis in the two years to March 2024 has been revised higher by almost 2 percentage points.”
We will receive a more detailed breakdown of these revisions when the Q3 GDP data is released, including revisions to the Q2 GDP data (which was reported at -0.2% quarter on quarter and -0.5% year on year).
“From the RBNZ’s perspective, these revisions are likely to be of low relevance,” Mundy said.
“The revisions won’t change where we are in the economic cycle, which we think is around the trough. And we still expect that the output gap will remain negative, showing growing excess capacity in the economy.”
All up, the grim data is unlikely to change the outlook for the RBNZ even if it is worse than it forecast in November, said ANZ’s Russell.
“We don’t expect the release to have major implications for the RBNZ’s near-term policy path,” he said.
Senior RBNZ policymakers have signalled a 50-basis-point cut at the February meeting, conditional on the economy evolving as expected.
“An outcome as we forecast, while weaker than the RBNZ’s expectation, would unlikely be sufficient to change the broader economic narrative.”
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.