New Zealand March 08 GDP
So the economy shrank 0.3% over the March quarter (or 0.6% if you buy the expenditure measure instead) – the appropriate tables are here (*).
This was bang on expectations. The stock boost we talked about was there, but everything else was sufficiently bad that it landed on expectations anyway 🙂
What concerned me was the GDP deflator (the fourth table) – 5.8% annual growth, highest since June 2001, when our dollar had tanked and inflation was sitting happily outside the target band. The aggregate supply story that I’ve shown my affection for is still running wild (*) (*) – temporary reversals in growth over the coming quarters and rising inflation.
Consumer confidence is in the toilet (*) (*) but this is because of significant price increases in food and fuel – cutting interest rates now will simply lead to bigger increases by reducing the value of the New Zealand dollar. Once lower interest rates do feed into consumer demand (once effective mortgage rates start to fall and exporters are able to change their fixed rate contracts), the drought will be well over, and economic activity will “attempt” to shoot upwards, capacity pressures will reappear, and inflation will be out of the bag. Ohhh well.
Update: Other New Zealand blogs talk about the figure: The Standard, The Hive.
Eh, 5.8%. That’s entirely consistent with RBNZ meeting its mandated goal of 1-3% in the medium term. So long as you let the medium term be more than 9 years long.
And really, who worries about the medium term anyway? As Keynes would have put it, in the medium run(*), we’re all dead.
(*) Note that when Keynes was writing, he said long run. But inflation has made today’s medium run the old long run anyway. Today’s long run is about three centuries.