Stats NZ figures last week showed the NZ Activity Index (NZAC) for May was 0.7% higher than last year, after April’s 0.8% rise.

CoreLogic chief economist Kelvin Davidson says while  these aren’t stellar results, they nevertheless show the economy “ticking over”.

Translating them into an implied GDP figure in Q2, there is an increase of perhaps 0.5% – enough to suggest the recession might already have ended, he says.

Davidson says the country needs to wait for June’s NZAC to have the full quarter’s worth of data, but early signs are encouraging for the wider economy.

“Emergence from recession will bolster employment and add to the sense that this property market downturn is all but over.”

Meanwhile, business and consumer confidence surveys indicate that both segments are not feeling as though the country is in a recession.

The ANZ Business Outlook Index leapt 13 points last month to -18, its highest reading since November 2021. Business confidence rose eight points to +3, the first time in 14 months it’s been positive.

Although 18% of respondents expect the economy to deteriorate in the year ahead, it is far better than the 31.1% pessimism level in May.

Inflation expectations, pricing intentions and cost expectations all declined. The ANZ says cost expectations had been sticky, but a general downward trend is now evident. “That said, pricing indicators all remain far too high, hardly trumpeting ‘job done’,” the bank says. 

Consumer confidence has risen to its best level in 18 months amid expectations of an end to rising interest rates, falling inflation and rising house prices.

The ANZ-Roy Morgan Consumer Confidence Index lifted six points to 85.5, showing pessimists still outnumber optimists, but still, the best level since January 2022.

More people reported feeling better off financially and expected to be better off next year.

The number who believe it’s a good time to buy a major household item, a key retail indicator, rose seven points to -27, the index shows.

The improving mood signals demand may prove a little more resilient across the second half of the year than the RBNZ is expecting, risking persistent core inflation, Sharon Zollner, ANZ chief economist, says. 

The housing market is also improving, with prices flatlining and activity warming.

Many economists refer to a “technical recession” with GDP falling a seasonally adjusted 0.1% in the three months ended March, following the December quarter’s revised fall of 0.7%.

The result was in line with economists' expectation of GDP falling 0.1%, and at odds with the Reserve Bank’s forecast of 0.3% growth.

However the central bank has shown a nimbleness in keeping monetary policy on a tightrope, compared with its counterparts in other countries. Its forecasts predict inflation getting back within the annual 1-3% target band by the end of next year.

Infometrics’ chief economist Brad Olsen says the economy’s resilience so far appears remarkable, which begs the question – dare we dream of a soft landing or will excessive demand and price force a tougher period than official forecasts are indicating?

“Although forecasts of no recession and a swift moderation in inflation are possible, we remain somewhat sceptical.

“In our view, there are risks that economic activity needs to be hit harder because inflation remains more persistent.

“Regardless of whether New Zealand has experienced a technical recession or not, economic conditions for the rest of this year and 2024 will feel recessionary, as we pay the price for our earlier support during the pandemic. All this economic pain is necessary to get the economy onto a more sustainable path for the future,” Olsen says.

While the major banks believe the country may have emerged from recession in this quarter, they say it will quickly stumble into another one later this year. 

“Economic momentum has ground to a halt,” Mike Jones, BNZ chief economist says.

The BNZ is now forecasting the economy will contract in the final quarter of this year and the first quarter of 2024, as does ASB Bank.

Output is being buffeted by sharply higher home-loan interest rates that have hit consumer spending as the central bank tries to tame inflation, the bank’s economic note says.

“Cost and inflation pressures have now crested the peak and are receding, and interest rates have probably peaked too,” Jones says. “But the cost of halting the inflation dragon is becoming more evident.”

Bloomberg Economics says the full effect of the RBNZ’s 525 basis points of rate hikes has yet to land and will inflict significant pain on households as borrowing costs climb.