Last week some very ugly retail sales figures for the second quarter raised the risk that New Zealand has already had a technical recession.
The volume of total retail sales fell 2.3 per cent in the June 2022 quarter, after a 0.9 per cent decrease in the March 2022 quarter when adjusting for price and seasonal effects, Stats NZ said.
The numbers were much worse than economists expected.
And although most of them still see us avoiding recession (at least this year) it was enough to prompt warnings that we might have already met the traditional definition - two successive quarters of economic contraction.
In the first Omicron-affected quarter of this year, GDP contracted by 0.2 per cent.
If we take consumer spending as a guide it looks plausible that we could see a similar contraction in the second quarter.
There's a third wild card option. The second quarter could come in negative and the first could be revised up into positive territory.
Just to complicate things, GDP data is ropey at the best of times.
Retail sales have shown a marked downturn. Photo / Sylvie Whinray
Revisions often shift the numbers around significantly. When it's already a line-ball call as to whether we're in growth or contraction, they can matter.
In real life, if it's that close, it just means the growth trend is flat.
But for some reason, we treat economic data - and especially GDP - as if it was a sporting contest, with binary outcomes.
Can we really call it a recession if unemployment is at a record low and we aren't seeing a rise in business failures?
In the US they've just said: no.
Unlike here, recessions in the US are formally called by the National Bureau of Economic Research.
Despite two quarters of economic contraction they've looked at employment data and decided the economy doesn't meet any meaningful definition of recession.
As someone who has lived through several serious recessions - the kind where the threat of redundancy was hanging over tens of thousands of people - I'm inclined to agree.
We might yet end up there. But we're not there yet.
Australian economist Paul Bloxham also says we can't call it a recession until we see a significant rise in unemployment.
It's worth noting his view because the HSBC chief economist for Australia and New Zealand is one of the few major bank economists picking New Zealand will go into recession - a proper one.
He fears we're in for enough of a tough ride in the next 12 months that unemployment will rise sufficiently to justify calling a recession.
It will need to if we're to beat inflation, he says.
I hope he's not right, but I think there's a good chance he will be.
I'll call it if I see it. I'm in the news business - two quarters of contraction will inevitably make the grade as a headline definition for me.
But what I won't do is pretend the label makes anything any more terrible than it already is. Or better for that matter.
There's no reason we should feel especially relieved if the numbers show we skipped recession.
We don't even find out about our second-quarter GDP performance (the three months to June 30) until September 15.
By then the economy will have moved on. It will already be worse or better.
What we can say with some certainty is that we are entering a downturn.
But we are doing it on our own terms.
Central banks are reversing course - tightening the money supply to suck all that stimulus cash out of the economy.
We are deliberately engineering an economic slowdown now to avoid a bigger one we would likely face if we allowed inflation to run and run.
In this process, recession is a risk. Shallow and shorter is preferable of course, but usually after a major economic shock some rebalancing is needed.
We should brace for that ... but keep it in perspective
The pandemic made us poorer, not richer.
We lived through the worst of it on central bank credit. We did that to avoid dealing with an economic collapse in the thick of a historic health crisis.
It was a choice and, in my view, it was the right one.
We saved jobs, we saved businesses and we saved retirement funds.
It has allowed us to pay the economic costs in a managed and orderly fashion.
