So New Zealand gross domestic product slid 0.4% in the September quarter. If we stick to thinking about it in “C+I+G+X-M” terms, like we have earlier, it actually fell by 0.7%.
Although everything came to pass as expected, it is still one hell of a downer – given that we are probably heading into a rough time for the global economy.
The key statistic for me is the terms of trade – if the terms of trade collapses, then the next year will be tough, if the terms of trade mystically holds up at current elevated levels I seriously don’t think the recession will get that deep. Households are responding to the rising cost of debt, falling house prices, and a shock to job security – this is fine in my books as long as the income earned in our country doesn’t start to fall as well (hence the concern about the terms of trade).
Of course – all indications are that our terms of trade is going to be in big trouble, come the start of 2009.
The next three months are going to be incredibly interesting.
Note: In the TOT wikipedia article, why is there a random dig on inflation targeting? I think the person has got confused by the fact that the lift in the exchange rate redistributes the gains of a rising TOT (from rising world export prices) between importers (like consumers) and exporters – thanks to a rising exchange rate back in 2007 we all nicked a piece of the farmers rising income 😉