New Zealand has avoided a recession, with Stats NZ on Thursday morning revealing a 1.7 percent quarterly lift in Gross Domestic Product (GDP).
There were fears the latest figures could reveal New Zealand's economy was in a technical recession - meaning two consecutive quaters of negative GDP growth - after a 0.2 percent contraction in the first quarter of 2022.
However, the jump in the second quarter means that has been avoided. The period saw the border starting to reopen - including to Australians and visa-waiver countries - and COVID-19 restrictions reduced. At the same time, unemployment is at a near-record low.
Stats NZ said the main contributor was the services industries, which had a 2.7 percent increase in growth.
"The reopening of borders, easing of both domestic and international travel restrictions, and fewer domestic restrictions under the Orange traffic light setting supported growth in industries that had been most affected by the COVID-19 response measures," Stats NZ national accounts – industry and production senior manager Ruvani Ratnayake said.
"In the June 2022 quarter, households and international visitors spent more on transport, accommodation, eating out, and sports and recreational activities."
Overall household spending declined 3.2 percent, with lower spending on goods like used motor vehciles and audio-visual equipment. There's also been a similar fall in retail trade activity.
The United States and United Kingdom both came in with 0.1 percent falls in their second quarters, while Australia saw 0.9 percent growth. The OECD total was a 0.4 percent lift.
ASB's Mark Smith said the data "continued the volatile run of recent quarterly outturns" following the 0.2 percent fall in quarter one, a 3 percent jump in quarter four of 2021 and a 3.9 percent decline in 2021 quarter three last year.
"Further volatility lies ahead as the NZ economy transitions back towards pre-COVID-19 norms, with how this occurs an added uncertainty. The NZ economy is unlikely to repeat its Q2 heroics, but underlying base momentum should remain, testament to the underlying resilience of the NZ economy and the support factors in the economy."
Council of Trade Unions economist Craig Renney said while the figures show the current strength of the economy, "there is a weakening trend of growth".
"Since the beginning of COVID the economy has grown by nearly 5 percent in real terms. Exports of goods and services rose 11.3 percent last year and annual GDP per capita continued to increase. Together with low unemployment this is a positive sign of the continuing resilience of the New Zealand economy.
"However, growth was quite frothy, being driven by strong growth in travel and tourism, accommodation, and hospitality. Manufacturing and construction both saw falls, as did agriculture. There is a need to make sure that all areas of the economy are growing so that we can build a balanced recovery from the effects of COVID."
Economists were predicting slight growth. The Reserve Bank in August said it expected GDP to have "rebounded" with a 1.8 percent lift. Prior to the figures' release, ANZ downgraded its forecast from 1 percent growth to just 0.4 percent, while Westpac went the other way, moving from a prediction of 1 percent to 1.8 percent.
"Leading indicators going into the second-quarter GDP release have been softer than expected on balance, indicating an economy struggling to get resource to grow, with COVID disruption only adding to that," said ANZ's Miles Workman.
Most in the sector were fairly open about the level of uncertainty around.
"The margin of uncertainty around our forecast - already quite wide throughout the pandemic - is particularly large this time," Westpac said in its weekly economic commentary.
"There were some big forces operating on the economy through the June quarter - not just the easing of the Omicron wave, but also the scaling back of the COVID response. And most importantly, the reopening of the border has seen the return of overseas tourists during what would normally have been the seasonal lull."
But independent economist Cameron Bagrie said New Zealand had taken essentially "two steps forward, two steps backward" after GDP rose 3 percent in the fourth quarter of 2021.
"The economy's been pretty stagnant," Bagrie said. "A lot of that stagnancy is because of supply - we haven't been able to meet demand because of damage to the labour force, productivity's been poor so we've had a pretty flat year."
"I suspect that flat year is going to continue into the next 12 months because the next 12 months is really when monetary policy is really getting its economic bite."
In a speech earlier on Thursday morning, Finance Minister Grant Robertson said New Zealand is not immune from global issue, like supply chain disruptions and a slowing Chinese economy.
"We have GDP numbers out later this morning, with the threat, but I hope not the reality of a technical recession – two consecutive quarters of negative growth – hanging over the economy.
"We also have some banks saying the economy may have grown by over one percent during the quarter. Forecasting, even as we move to the next chapter of this 1-in-100 year pandemic, remains more of an art than a science."
