Here’s the problem: we aren’t sure where the economy is going at the moment.
Usually, it’s pretty clear.
Either the economy is strong and we worry about inflation, or it’s weak and we worry about enough spending and employment.
It’s either inflation or recession.
At the moment, people are talking about both, and the numbers are pointing in both directions.
High employment and profits point to a strong economy.
For example, weekly earnings grew over the last year.
Statistics NZ reported it was the biggest growth since it started tracking the indicator in 1998.
Some businesses are making record profits.
Banks have reported record profits, and several large public companies have, too.
The Treasury has reported that it is collecting more tax revenue from businesses.
As a result, the Reserve Bank is raising interest rates. That’s what it does when the economy gets too strong.
There are signs of a weak economy as well.
Statistics NZ reported that the economy shrank slightly in the March quarter.
A second negative quarter would mean that New Zealand is in a recession.
They also reported lower consumer spending through credit and debit cards in the same March quarter.
Then there is the higher cost of living.
Inflation is high and is eating into the real value of people’s money.
Even with jobs and good earnings, people are struggling.
How could we be in a recession, but with great employment and profit numbers?
One explanation is that all these numbers are estimates.
If the economy is turning from weak to strong, getting each estimate a little bit wrong can create a confusing picture.
Timing can be a part of this.
We could have a weak March quarter but a strong June quarter.
Another cause could be net migration.
The country lost 7300 people in the year to March. Fewer people means less economic activity.
That loss would explain more than half the fall in the economy.
Finally, it’s clear that some people are doing well while others are not.
Uneven economic growth can mean businesses and workers are doing well on average while some people struggle.
By now, you might be confused. I know I am.
I’m sharing these details to encourage a bit of scepticism.
A few commentators have been quite certain in their opinions that the whole economy is about to fall over.
Maybe, maybe not. Let’s pause a moment and see what happens next.
