A double dip recession cannot be ruled out, the New Zealand Institute of Economic Research (NZIER) says in its December quarterly predictions report.
"We expect wintry economic conditions this summer," NZIER said in the report which predicts the economy will be weak into early 2011.
"A double dip recession cannot be ruled out but it is not our central scenario. Instead, we expect weak activity over coming months, before a more sustained recovery from mid 2011," principal economist Shamubeel Eaqub said.
"The recovery will be shallow and volatile," he said.
Indicators such as levels of house sales and domestic trading activity measures point to a slow finish to the year, even without the destruction and disruption of the Canterbury earthquake in early September.
The institute forecasts economic growth of 1.7% in 2010, rising to 2.% in 2011 and 2.9% in 2012.
The Canterbury earthquake will weigh on growth in late 2010 but boost growth next year as reconstruction begins and the regional economy reverts to more normal spending patterns.
"Economic activity will be weak through late 2010 and early 201, but we expect a more sustainable and broad based recovery from mid 2011.
"For businesses with tight capacity this is the time to invest; to capitalise on a more sustainable recovery from mid 2011," Mr Eaqub said.
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