Liam Dann: We'll plough on through weird and wild times

Glum faces on the Fashion Week runways seem to reflect the mood of the times. Photo / Babiche Martens

Liam Dann writes that everything looks grim and grey as the spectre of the October jinx looms over us again.

It's nearly October so it must be time for a stock market crash. Is that overly gloomy? After the wettest, windiest, quakiest September in living memory gloom is certainly back in vogue. Perhaps that's why all the models at New Zealand Fashion Week look so glum - always on trend.

Then again (and if this is unfair let me know) it is unlikely that the finer points of Alan Bollard's latest monetary policy statement have been troubling the young, skinny things milling around the Viaduct catwalks.

And troubling though Bollard's concerns were, this week's GDP figure was even worse. The 0.2 per cent growth figure for the June quarter confirmed that the economic slowdown to which Bollard referred had in fact kicked in earlier and harder than anyone expected.

It was an appropriate bookend for what has been a pig of a month.

After the Christchurch quake and the snow damage to agricultural production, who knows how bad the September quarter is going to look.

Which brings us to the outlook for October. It is usually a big month for the economy and the markets.

Bill English was this week talking up the stimulatory power of the income-tax cuts which kick in from October 1.

Perhaps they could provide a shot in the arm for the retail sector. But for many the drop in income tax will be undercut significantly by the October 1 GST rise pushing up the cost of living.

And even where there are net gains it still remains to be seen whether households will spend that extra cash.

Certainly the pre-GST spending boost predicted by many doesn't seem to have materialised. Households are increasingly saving and paying down debt - which is a good thing but which means we'll have to live for longer with a low-speed economy.

Maybe the weather will improve in October - it can't get much worse - and as days get longer the overdue arrival of spring might still inject a bit of life into the stagnant housing market. As much as the October spike in house sales is a hardy annual for the economy, so too are the October jitters for markets.

October crashes have been part of stockmarket folklore since 1929 when Wall Street was hit by one which sparked the Great Depression. Sure there have been plenty of uneventful Octobers in between, but there is something uncanny about the fact it was October 1987 when the market crashed again. And in October 2008 markets completely melted down - admittedly after some months of credit-crunch-induced turmoil. Big October falls in 1937 and 1997 add to the mystique.

Human behaviour being what it is the October jinx may now have an element of self-fulfilling prophecy about it.

Last year Wall Street markets rallied through until October 19 before investors lost their nerve. Over the remaining days of the month the S&P 500 index dropped 5.6 per cent - including a fall of 2.8 per cent on October 30 - 80 years and a day after 1929's "black Tuesday".

This year US shares have rallied through September and, given the volatility in the market, picking another sell-off in October is hardly betting against the odds.

But if and when it comes to the crunch we ought to be able to keep the slump in perspective. It is going to take something pretty dramatic to shock a global economy as battered and bruised as it is now.

These are weird and wild times. Roll on October 1.

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