Otago household confidence in positive ground

A Westpac regional confidence survey indicated a patchwork economy in December, the confidence of households in their local economy rising in seven out of 11 regions.

Economic confidence in Canterbury remains highest by far, but there was good news for Otago in the report, household confidence in the region moving marginally into positive territory in December.

The Otago index went from -26% in September to 1% in December, rebounding sharply from its lows of three months ago.

Westpac economist Felix Delbruck said Otago had been hit hard by a difficult exporting environment and Government cutbacks which had affected the health and education sectors.

''With recent signs of improvement in the global economy, prospects may be looking less gloomy for the region's farmers and tourism operators,'' Mr Delbruck said.

In Southland, the regional economic confidence fell further, a net 25% of households expecting mainly bad times over the year. That is the most pessimistic the region had been since the Asian crisis in the late 1990s, Mr Delbruck said.

Southland was now the second-most pessimistic region in the country after Northland, a ''stunning reversal'' of its standout optimism just six months ago.

''We suspect the job cuts and the threat of closure at Tiwai Pt have hit sentiment in the region hard.''

Meanwhile, confidence in Canterbury had surged for the third time in a row and continued to lead the rest of the country by a long way, he said.

A net 41% of households in the region now expected mainly good times in the year ahead - the highest since December 2009 and, before that, late 2007.

''The earthquake repair and rebuild effort is now clearly under way. While parts of the region are still struggling, on most indicators the Canterbury economy has been steadily marching upwards in the last six months.''

In a major turnaround from September, Auckland was now also back in optimistic territory, 23% of households expecting good times ahead, Mr Delbruck said.

He was in no doubt that an increasingly exuberant housing market was feeding through to broader economic confidence in the region.

Developments were mixed in the more export-oriented regions. While dairy prices had risen and there were signs that global economic conditions were improving, the level of confidence in most of those regions was still ''cautiously optimistic'' at best - a reminder that export conditions remained tough, he said.

Public sector cutbacks had been an additional factor weighing on the local economy in Wellington and to some extent in Otago.

The survey was conducted between December 1 and 10. The total sample size was 1577.