New Zealand Has Officially Dipped Into Recession

New Zealand has followed Germany and officially slipped into recession. 

The economy shrank in the first quarter, data showed on Thursday, reducing 

the risk the central bank would need to hike interest rates further but creating 

a new headwind for the government’s re-election hopes.

Germany Is Officially In A Recession

According to a report by Reuters, gross domestic product (GDP) matched 

analysts’ expectations of a 0.1% contraction in the March quarter but was 

well below the Reserve Bank of New Zealand’s (RBNZ) forecast of

 0.3% growth. Furthermore, fourth-quarter GDP was revised to a 

contraction of 0.7% from a decline of 0.6%.

“It’s clear that the New Zealand economy is losing momentum,” 

Westpac senior economist Michael Gordon said in a note. “What 

remains to be seen is whether things have slowed enough to put 

us on a path back to low and stable inflation.”

Weakness in the economy was “broad-based” with output from 

half of the country’s industries contracting, according to the 

Statistics New Zealand data. Growth was hurt by the impact of 

two major cyclones and flash floods in Auckland in January 

and February.

Employment remains strong in New Zealand which is limiting 

the effects of a recessionary environment for much of the population. 

But the problem of inflation persists. Inflation in New Zealand is 

tracking at 6.7%, well above the central bank’s target band of 

1% to 3%.

The media is also attempting to stress that the recession remains 

technical after two consecutive quarters of contraction. It has 

become a significant political issue as New Zealand heads towards

 an election in October, with voters struggling with higher 

living costs.

The U.S. may or may not be on the brink of a recession, but it’s 

hard to tell when the data is manipulated and the ruling class and 

central banks decide what the public needs to believe.

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