I was called “a misery guts” last week, as I refused to participate in the party celebrating the end of the recession. Here are a few reasons why our celebrations should be somewhat muted, at best.

1. The much touted 0.1 percent represents a $27 million increase between the March and June quarters in seasonally-adjusted GDP measured in 1995/96 prices. This $27 million is made up from

1. i) a $17 million decrease in the total of GDP across all the constituent industries.
2. ii) a $28 million increase in total GDP unallocated to any industry.
3. iii) a $16 million increase in the statistical discrepancy.

That is, we are having a party because there was growth in GDP from an unknown industry and in the statistical discrepancy. Even more concerning was that the NZ$ went higher when these numbers were announced, presumably because the ‘all knowing markets’ saw the numbers as an indicator that the fundamentals (see 2, 3 and 4) were sound.

The end of the recession - yeah right!

Category	Change between March and June quarters $95/96$m
Sum of GDP of all industries	-17
GDP unallocated to industry	+28
Statistical discrepancy	+16
GDP production measure	+27

2. Amongst the industries, manufacturing GDP (including primary product processing activities) declined a further 1.5 percent during the quarter. This was the fourth consecutive quarter of contraction in the manufacturing sector. Manufacturing GDP in the year to June was 9 percent below that of the previous June year. Furthermore, GDP in manufacturing in the latest June year was a princely 2.1 percent above that in the year to June 2002. (i.e. an average compound rate of growth of 0.3 percent per annum over 7 years).

3. On the expenditure side of the GDP measure, there was a 4.3 percent decline in business investment. This is the fourth consecutive quarter of contractions in this spending category, with the year to June total being 15 percent below that of the previous year (Business investment over the five years to June has expanded at an average compound rate of growth of 1.3 percent per annum). This does not bode well for engendering sustained, long-term improvements in prosperity through productivity gains.

4. Exports have surged in the latest quarter, primarily on the back of log exports to China and a rebound in dairy exports from last year’s slump. The year to June saw total export volumes total to 31.1 percent of total GDP volumes compared to 30.4 percent a decade ago in the year to June 1999. In contrast the ratio of import volumes to total GDP has reached 34.5 percent, rising from 29.7 percent a decade ago. This does not provide any degree of confidence as to an economy based on a vibrant, outward-looking, competitive export sector.

I think the above is enough to at least suggest we should go easy on the Bollinger.