Storm clouds gather over the economic outlook

New Zealand’s retail sales fell for a third consecutive quarter in Q2, as households continued to tighten their belts. What’s more, the sharp drop in heavy traffic volumes in July suggests that goods spending will slump further in Q3. Although services consumption has been fairly resilient thus far, leading indicators suggest it will slow sharply in the coming months. Meanwhile, in Australia, PMI data indicate that output slid deeper into contractionary territory in August, reinforcing our view that the economy will enter into a recession this quarter.