“The good news is that improving forward indicators suggest the economy has returned to growth in Q3 [quarter three], hopefully sparing us another technical recession,” ANZ said.

Two consecutive quarterly declines in GDP are deemed to meet the definition of a recession – and the economy did exactly that with two 1.0% contractions in the June and September quarters of last year.

ANZ said the unexpectedly weak growth over the June quarter was a key reason why the Reserve Bank signalled two further 25 basis point cuts in its Official Cash Rate (OCR) in the August monetary policy statement.

“Growth in line with – or weaker than – their -0.3% forecast would reinforce this stance,“ the bank said.

“A stronger print could challenge it, but would still need to be squared with recent weakness in the broader suite of data,” ANZ said.

Kiwibank said a culmination of factors had weighed on activity over the quarter — from heightened uncertainty around tariffs, to the ongoing under-performance of the housing market.

“Ultimately, it’s the goods-producing sector that appears to have been the biggest drag on the economy,” Kiwibank said.

“There’s a real feeling of disappointment across Kiwi businesses.

“What’s particularly frustrating is that the decline comes after a period where the economy seemed to be turning a corner.”

Kiwibank noted the GDP gains over the December and March quarters.

“But now that strength has faded. On an annual basis, activity has been flat, meaning the economy is no larger or smaller than it was a year ago,” Kiwibank said.

BNZ economists, who have been warning of an economic contraction in the second quarter for some time, are at the more pessimistic end.

The bank lowered its GDP forecast to -0.5% from -0.2% after crunching through the latest set of manufacturing, wholesale trade, and services data, which showed manufacturing sales volumes fell 2.9% in the June quarter.

Manufacturing activity declines were prevalent across significant parts of the sector, with falls noticeable in food processing, chemical, non-metallic mineral products, metals, and transport and machinery equipment manufacturing.

Other indicators suggested construction sector activity also declined over the period, BNZ said.

Harbour Asset Management fixed interest and currency strategist Hamish Pepper said the interest rate markets look to be aligned with the Reserve Bank’s forecasts.

Overnight indexed swaps – which offer a live indication of where the market expects the OCR to go – point to the rate hitting 2.5% by February next year.

The OCR currently sits at 3% after the Reserve Bank’s quarter-point cut in August.

Pepper expected the June quarter GDP data to mark a low point in the economy, from where it can be expected to gradually improve.

Looking ahead, he noted the external sector – dairy, sheep and beef exports – were “going great”.

In addition, if Fonterra’s $4.4 billion sale of its consumer business to Lactalis goes ahead, the average Fonterra dairy farmer can look forward to a $400,000 tax-free windfall in the first half of next year, according Harbour’s estimates.

The current dairy season, which peaks in October, is also shaping to be a strong one, raising the chances of two consecutive seasons of very high farm gate milk prices.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.