© Reuters. FILE PHOTO: People walk on Lambton Quay in Wellington, New Zealand July 23, 2020. REUTERS/Praveen Menon
By Lucy Craymer
WELLINGTON (Reuters) – Confidence in New Zealand has tumbled in recent weeks, raising concerns that the country could be headed for a deeper recession than most forecasts.
The December ANZ Consumer Confidence survey released earlier on Wednesday fell to its lowest level since it began in 2004 and was followed by Westpac’s quarterly confidence survey. on Monday, the survey also recorded its lowest level since it began in 1988. The ANZ Business Confidence survey also hit a record low.
Bank of New Zealand senior economist Doug Steel said: “There is no doubting the gloomy economic mood across the country today.
“It all points to a deeper recession ahead that some are concerned about. A sharp hike in interest rates is certainly part of the mix,” Steel added.
New Zealand’s central bank has embarked on an intense tightening cycle with interest rates now 400 basis points higher than October 2021 as it tries to reduce inflation found to just below three-decade highs. century. Both it and New Zealand’s Ministry of Finance forecast the country will move into a shallow recession in the second quarter of 2023.
Economic growth in the third quarter showed that the country’s economy continued to maintain well, reaching 2.0%.
Satish Ranchhod, senior economist at Westpac, said in a note that the combination of weakening business conditions and consumer confidence underpins expectations of an economic slowdown.
Ranchhod added: “While the recession is not expected to be as deep, we are still looking at a period of weak demand that extends over the next 18 months. And that should see billions unemployment rate is higher”.
He said the slowdown was needed to cool inflationary pressures but the business confidence survey showed no sign of easing cost pressures.