We must be in a recession? (Again!)

When I look back at the last quarter of 2023, I read and see pain.

Here are a few examples.

Black Friday sales were down.

I.e. Retail NZ says Black Friday sales were down by about 10% in 2023.

Retail sales down.

I.e. The total volume of retail sales fell 1.9% in the December 2023 quarter according to figures released by Stats NZ.

Xero small business insights say sales were down.

I.e. Sales fell an average of 0.3% y/y in the three months to December, including a sharp 1.9% fall in the month of December…small businesses, in aggregate, have been selling fewer goods and services than a year ago for 13 of the past 14 months.

I am a pretty simple guy and no expert in economics nor Gross Domestic Product (GDP) but that doesn’t look good.

Of course, there are many other things that contribute to and make up the GDP of a nation, but I like to focus on consumer behaviour because I feel like it is an output of how a lot of the rest of the economy is going.

And that ‘feeling’ which I KNOW, isn’t data, doesn’t feel great.

The 1 thing I picked up when reading the latest OCR announcement is that the RBNZ expects the GDP data for the December quarter to be 0.0%.

Not even up by 0.1% or down by -0.1%

A perfect 0%.

What’s the rule? Anything that ends in a 0 must be a lie, right?

(Or, not entirely accurate).

Whilst most writers were focusing on the OCR and interest rates because they are biased toward their own position of hoping for lower interest rates due to their own debt levels, I was trying to figure out where the economy is going.

So, on the 21st of March, when Statistics NZ release the latest GDP data, we may well again be in a technical recession.

A technical recession is 2 negative quarters of GDP - basically GDP going backward, 2 quarters in a row.

It’s a case of de ja vu because we learnt about this last year when I warned you that the flashing red headlines were coming.

We entered a recession. Then we kind of didn’t.

Because March 23 was -0.1 but revised to 0.0.

BUT then the data was revised again and hello, March was -0.2.

Recession confirmed in 2023.

Here we are again.

On the 21st of March, if that 0.0% is a lie, perhaps we will be in a recession.

However, please remember, it started in July 2023 as that’s when the first quarter of GDP was negative.

The September quarter was down -0.3%.

The unfortunate thing is, it feels like this current quarter (ending 31 March 2024) is even weaker.

January was a terribly slow month for business from what I saw.

Cash flow was getting tighter too.

Every day kiwis were still buying in January but putting it on tick and are now getting behind (at record levels).

They can’t keep spending and their behaviours will have to change.

There are restructures and liquidations.

Earnings season for our large NZ businesses were brutal.

People are changing their behaviours out of necessity.

More people are exploring ways to increase their income.

It’s really tricky out there at the moment and I feel like we are entering the eye of the storm.

So get ready for more flashing red signs and headlines.

Fear sells because we are all attracted to it.

The headlines will keep coming, and the worry will be deep inside all of us.

If you can’t handle them, focus on what you can control and keep moving forward.

Regardless of what we learn on the 21st of March, as I always say, zoom out.

It’s going to be a cold winter economically and we will all feel the chill.

But summer eventually returns.

Start getting yourself ready NOW for when things turn.

Prepare in the winter, for the summer.

This keeps us looking further ahead and not stuck in the here and now.

What did Warren Buffett do during the 14 recessions he has lived through?

Holiday and do nothing, waiting for the good times to come back?

Doubt it!

Did the best athletes in the world give up on their careers when the world shut down due to the vid?

Doubt it!

When the headwinds get stronger, don't stop peddling.

Yes, progress is slower and harder.

But those who stop peddling consistently will fall further behind.

A reminder from Money Mail 163. 2 quotes I’ve come across that stuck out to me:

"You can make more ground on your competitors in a difficult time than when times are good - that's when it's almost too easy for everyone to be successful."

“You cannot overtake 15 cars in sunny weather…but you can when it’s raining.”

See you next week when we know whether we are in a recession or not.

Be bold,

Luke

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_____________________________________________________________________Did you know:?Total retail spending dropped 1.8% on a seasonally-adjusted basis in February - ?Statistics NZ

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