September GDP preview

So on Christmas eve we get a special present – confirmation that we have so far had a three quarter recession 🙁

The main market in town, iPredict, is spot on with the 95% pick for a negative GDP quarter.

Let us discuss 🙂 :

Take GDP=C+I+G+X-M. C is our consumption. Retail sales collapsed, indicating that consumption is likely to carry on down the path.

I is our investment. Now we know that total work put in place fell. Furthermore, stocks were elevated in June, something that firms may look to have remedies over September. The PMI and manufacturing series suggests at least that manufacturing stocks have been run down.

X-M is net exports. Now, according to the trade indexes this measure will couldactually contribute to a net increase GDP this quarter – however, we will have a clearer idea when the Balance of Payments numbers are out.

G is most likely a positive contributor again – especially since it tends to be counter-cyclical.

How big will the fall be, the RBNZ picked 0.2%, the median economist is picking 0.5%, I would say a greater fall than 0.8% would be very concerning – especially since the recent vicious contraction in credit market would not have had any impact no the September quarter.

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  • DG

    Net exports are positive but this is in large part a function of what looks like a 17% fall in plant and machinery investment after an oil-industry inspired surge in Q2.

  • “Net exports are positive but this is in large part a function of what looks like a 17% fall in plant and machinery investment after an oil-industry inspired surge in Q2.”

    Very true – I don’t know why I didn’t mention that 😛

    If I remember correctly, the capital imported for the Tui Oil field was fully purchased rather than leased – so it should have all been in the June quarter trade figure. As a result, we can expect a further sharp fall in I over this quarter from this as well.