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        JAMES WEIR

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    <div class="toolbox_date">Last updated 05:00 21/03/2011</div>
    
    
    

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  <p>

    The economic recovery stalled in the second half of last year, with official figures due out this week expected to show the December quarter barely growing or tipping back into recession, economists say.
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    The economy is expected to remain in limbo in the first half of 2011 because of the February 22 quake in Christchurch and the quake, tsunami and nuclear power plant crisis in Japan.
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    The economy contracted 0.2 per cent in the September quarter last year, so another fall in the December quarter would push New Zealand into a double-dip recession. But it may be by the smallest of margins, with a market median forecast of just 0.2 per cent growth.
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    Westpac Bank economists estimate growth of 0.4 per cent in the December quarter, with a boost from manufacturing, a rebound in food production after last year's drought and a jump in forestry offsetting a downturn in retail sales.
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    ASB Bank expected a contraction of just 0.1 per cent, though it said there was more uncertainty than usual, after an early 2010 recovery stalled.
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    There would be a lift in manufacturing, wholesale trade and building in the December quarter, ASB said, but that would be offset by weak demand in other sectors, especially retailing. ASB estimated retail sales fell 2.3 per cent in the December quarter.
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    The tiny contractions in both the September and December quarters meant a technical recession, but the economy was really moving sideways rather than backwards, ASB said.
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    However, the February 22 quake in Christchurch meant the economy was expected to fall back again in the March quarter 2011, ASB said, with retail, hospitality, business services and building all affected. Beyond that, economic recovery would be slow, with rebuilding in Canterbury likely to be delayed till 2012, ASB said. Spending was expected to remain subdued, especially with high petrol prices and rising food prices.
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    When the Reserve Bank cut official interest rates to 2.5 per cent on March 10, to shore up confidence in the wake of the Christchurch earthquake, it forecast no growth at all in the December quarter. The central bank slashed rates to emergency levels because of fears the latest quake could derail the recovery this year.
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    So even if the economy fell back into recession in the December quarter, it was unlikely to see the Reserve Bank cut rates even further, economists said. A rate rise is not expected till 2012.
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    ANZ Bank economists expected the economy to remain in "limbo" for the first half of 2011, till rebuilding in Christchurch picked up and a tourism boost from the Rugby World Cup later in the year.
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    Westpac expected growth of 0.4 per cent in the December 2010 quarter, not because of any underlying strength, but because of the easy gains expected in some sectors after a depressed September quarter last year.
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    Drought and the first quake in Christchurch affected the June and then September quarters last year, but were likely to wash out in the December period, Westpac said.
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    Manufacturing accounts for about 12 per cent of the economy and it was expected to be one of the biggest "swing" factors boosting growth in the December quarter.
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    Agriculture and food production also got a boost from better growing conditions after the autumn drought and September snow storms, with a strong rebound in meat and dairy exports in the December quarter.
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    Forestry export volumes raced up 11 per cent in the final three months of 2010, so were also likely to be a big plus for growth.
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    <p><strong> - The Dominion Post</strong></p>





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  </div></div><p><strong>Read more:</strong> <a class="rssreadon" rel="external" title="Economy stalling as quakes hit" href="http://www.stuff.co.nz/marlborough-express/business/4789771/Economy-stalling-as-quakes-hit" target="_blank">http://www.stuff.co.nz/marlborough-express/business/4789771/Economy-stalling-as-quakes-hit</a></p>