The construction and manufacturing sectors took the biggest hit.<\/p>\n
The industries had the largest decreases in sales in the June 2025 quarter out of the 14 industries measured by business financial data released by Stats NZ.<\/p>\n
Compared with the March 2025 quarter, manufacturing sales were down by $1 billion, and construction sales were down by $720 million.<\/p>\n
That prompted BNZ senior economist Doug Steel to downgrade his expectations for the second quarter GDP to a contraction of -0.5% (from -0.2%).<\/p>\n
Other economists will release their final picks in the coming days and we\u2019ll run a full Gross Domestic Product (GDP) preview on Monday.<\/p>\n
Recovery stalls<\/p>\n
The second-quarter slump has been a major disappointment, coming after strong growth in the first quarter of the year sparked hopes that the recovery was gathering momentum.<\/p>\n
Some of the blame for the second-quarter slowdown has been attributed to the tariff shock that rocked financial market confidence at the start of April.<\/p>\n
But in reality, the tariffs haven\u2019t yet had a significant impact on New Zealand\u2019s economy.<\/p>\n
Perhaps Donald Trump\u2019s big Liberation Day announcement undermined confidence, although one suspects that the recovery must have been pretty fragile to start with.<\/p>\n
The construction slump and lacklustre property market seem to have hit Auckland especially hard.<\/p>\n
While there is talk of a two-speed recovery and some brighter news in the regions, the way GDP is measured, including services, means it is weighted towards reflecting the larger centres of population.<\/p>\n
In other words, the dairy boom won\u2019t directly boost GDP in the short term (although the earnings will flow through and boost overall activity in time).<\/p>\n
For example, while nearly one in every four dollars from total exports comes from the dairy sector, it actually only accounts for 3.2% of GDP.<\/p>\n
Are we in recession again?<\/p>\n
It\u2019s worth noting that the Reserve Bank\u2019s real-time GDP model, the Kiwi-GDP Nowcast, has been forecasting that economic growth stayed positive for most of the second quarter.<\/p>\n
It estimates that the economy didn\u2019t fall back into contraction until mid-June and we\u2019ve stayed in contractionary territory since then.<\/p>\n
That implies that (with only 20 days of the third quarter left) we might already be back in a technical recession.<\/p>\n
That\u2019s probably a moot point for many struggling businesses and households in Auckland who probably feel like it has been one long recession.<\/p>\n
Such is the delay in getting GDP data that we\u2019ll get a whole suite of early indicators for the current quarter before next week\u2019s release.<\/p>\n
We\u2019ll see the August numbers for migration and tourism later today, and electronic card transactions on Friday.<\/p>\n
Friday will also see the release of the Performance of Manufacturing Index (for August) and on Monday, we\u2019ll get the Performance of Services Index.<\/p>\n
Here\u2019s hoping we see some green shoots among all those numbers. At this point, that would probably be more significant than where the Q2 GDP finally lands.<\/p>\n
Green shoots.<\/p>\n
If there\u2019s any upside to the latest grim numbers, it\u2019s that there seems to be a clear path for the Reserve Bank (RBNZ) to keep cutting <\/a>the Official Cash Rate.<\/p>\n In the last Monetary Policy statement, the RBNZ had a contraction of -0.3 pencilled in for the second-quarter GDP.<\/p>\n And eventually those lower rates have to flow through and give the economy a boost … surely!<\/p>\n Interest rate pass-through<\/p>\n Speaking of lower rates, last week<\/a> Inside Economics answered a reader\u2019s question querying the pass-through of cuts by major banks after last month\u2019s Official Cash Rate (OCR) cut.<\/p>\n To compare different banks, I leaned on research by the Financial Markets Authority (FMA).<\/p>\n Turns out this was a new regular feature being offered by the FMA, which has been in touch to give us a bit more context.<\/p>\n Here\u2019s how the FMA\u2019s OCR Pass Through Transparency page will work.<\/p>\n \u201cEach time the RBNZ changes the Official Cash Rate, the FMA will ask the eight financial institutions that provide ~98% of housing loans to New Zealand consumers to tell us the interest rates on their floating-rate mortgages and their on-call savings accounts that match the standard consumer profiles we have provided for these products,\u201d the FMA says.<\/p>\n \u201cWe will publish the information received from them on our website one week after the OCR is announced.\u201d<\/p>\n \u201cWe\u2019re doing this to improve transparency. We want to help consumers better understand the speed and magnitude of bank responses to OCR changes.\u201d<\/p>\n \u201cThis helps consumers make informed decisions about banks and banking products that meet their needs. It will also encourage banks to reflect on fair treatment for their customers and how their products align with customers\u2019 requirements.\u201d<\/p>\n Our biggest bank responds<\/p>\n ANZ \u2013 who didn\u2019t come out too badly in the FMA survey, having passed through 20 basis points (bps) of the 25bps cut \u2013 also saw my item.<\/p>\n A spokeswoman got in touch to offer more context.<\/p>\n \u201cThrough the recent interest cycle, following changes to the OCR, there are times when we\u2019ve not passed on changes to the OCR in full,\u201d she said.<\/p>\n \u201cFor home loans, ANZ has passed on 94% of the OCR decreases compared to 80% of the increases.\u201d<\/p>\n But the lack of full pass-through can work both ways …<\/p>\n \u201cBetween October 2021 and May 2023, the OCR increased by 5.25%. In response, ANZ increased floating home loan rates by 4.20% and Serious Saver by 4.30%,\u201d the spokeswoman said.<\/p>\n \u201cDuring this time, the Reserve Bank of New Zealand (RBNZ) increased the OCR 12 times. Following seven of those announcements, ANZ did not pass on the full OCR increase to lending rates (after the 50-basis-point increase to the OCR in February 2023, ANZ made no change to interest rates).\u201d<\/p>\n In the easing cycle, since August 2024, the RBNZ has cut the OCR seven times. It has fallen by 2.50% from its peak of 5.50%.<\/p>\n \u201cIn response, ANZ NZ has reduced home loan floating rates by 2.35%,\u201d the spokeswoman said.<\/p>\n \u201cFixed rates have fallen even further. Since we started cutting rates in March last year, our one-year home loan special rate has fallen by 2.64%.<\/p>\n \u201cWhen reviewing interest rates, ANZ considers a range of factors, including the OCR, changes in wholesale interest rates and the need to balance the needs of borrowers and savers.\u201d<\/p>\n Butter update<\/p>\n It\u2019s been a couple of weeks since I noted that the price of butter has actually been falling since May (in global commodity markets, not your local supermarket).<\/p>\n Last week\u2019s Global Dairy Trade Auction extended the fall, with butter down another 2.5%. It\u2019s now off almost 13% since its peak.<\/p>\n More broadly, dairy prices were off across the board<\/a>, but not so much that it will have rattled Fonterra.<\/p>\n For shoppers, though, the question is when will we see prices fall on the supermarket shelves?<\/p>\n Well, it might be happening already. All the major supermarket chains have maintained home-brand prices at around $8.50 throughout this period of high prices.<\/p>\n It\u2019s unlikely we\u2019ll see those prices, which rely on squeezing retail margins, drop in a hurry.<\/p>\n But at the other end, prices for premium branded butter by the likes of Anchor and Mainland ought to start moving down soon.<\/p>\n We should get some insight into early progress with the next Selected Price Index from Stats NZ next Tuesday. That will capture food price movements in August.<\/p>\n Sweet meat prices<\/p>\n One thing the Selected Price Indexes won\u2019t show is any relief for beef and lamb lovers.<\/p>\n This week, the Herald\u2019s Jamie Gray took a look at the latest commodity price<\/a> moves for sheep and beef meat.<\/p>\n It was all good news for exporters (probably not so much for shoppers).<\/p>\n \u201cNew Zealand sheep and beef farmers are riding the crest of a wave as world meat prices hit their highest point ever, while the full impact of US tariffs is yet to make its presence felt,\u201d Gray wrote.<\/p>\n The United Nations\u2019 Food and Agriculture Organisation (FAO) said its meat price index averaged 128.0 points in August, up 0.7 points (0.6%) from July and 5.9 points (4.9%) from a year ago, marking a new all-time high.<\/p>\n Meat Industry Association (MIA) data show that over the last 12 months, the average value of overall New Zealand beef exports has steadily increased from $9.18\/kg in July 2024 to a record $11.20\/kg in July this year.<\/p>\n Over the last 12 months, the average value of overall sheepmeat exports has increased from $9.87\/kg in July 2024 to $13.52\/kg in July this year, according to the MIA.<\/p>\n It really is quite rare for sheepmeat, beef and dairy prices to be all firing at once.<\/p>\n It might make BBQ season a bit pricey this year, but you have to believe that it will eventually drive a recovery for this tiny exporting nation.<\/p>\n Inside Economics takes a break next week as I\u2019ll be travelling in China.<\/p>\n Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up to his weekly newsletter, click on your user profile at nzherald.co.nz<\/a> and select \u201cMy newsletters\u201d. For a step-by-step guide, click here<\/a>. If you have a burning question about the quirks or intricacies of economics send it to liam.dann@nzherald.co.nz<\/a> or leave a message in the comments section.<\/p>\n","protected":false},"excerpt":{"rendered":"It has been widely expected that the release next Thursday (September 18) would show a flat quarter for…\n","protected":false},"author":2,"featured_media":12362,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[1443,806,14772,138,14107,5782,14769,11774,10668,1951,219,14768,12410,14767,9978,305,191,2944,296,14774,13419,12514,14770,14776,6096,14771,130,111,43,6042,139,69,13420,9831,14773,2919,10042,7192,14777,14775,7806,544,199,686,6041,1845],"class_list":{"0":"post-12361","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-about","9":"tag-as","10":"tag-burning","11":"tag-business","12":"tag-click","13":"tag-comments","14":"tag-deeper","15":"tag-dive","16":"tag-economic","17":"tag-economics","18":"tag-economy","19":"tag-every","20":"tag-gdp","21":"tag-gloom","22":"tag-grows","23":"tag-have","24":"tag-here","25":"tag-inside","26":"tag-into","27":"tag-intricacies","28":"tag-june","29":"tag-leave","30":"tag-leftfield","31":"tag-liamdannnzheraldconz","32":"tag-message","33":"tag-missed","34":"tag-more","35":"tag-new-zealand","36":"tag-news","37":"tag-newsletter","38":"tag-newzealand","39":"tag-nz","40":"tag-quarter","41":"tag-question","42":"tag-quirks","43":"tag-recession","44":"tag-rises","45":"tag-risk","46":"tag-section","47":"tag-send","48":"tag-sign","49":"tag-some","50":"tag-take","51":"tag-week","52":"tag-weekly","53":"tag-welcome"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/12361","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=12361"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/12361\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/12362"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=12361"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=12361"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=12361"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}