Business South’s latest quarterly survey, for Q2 2026, showed a ‘‘significant softening in business confidence across the lower South Island’’.
‘‘Across almost every measure, confidence has softened from the highs of late 2025,’’ the survey said.
Of 363 businesses surveyed across Otago and Southland, only 32% expected the southern economy to be stronger in 12 months — down from 66% in Q1.
In Dunedin City, this was only 27%.
The changes to confidence were driven by the ongoing conflict in the Middle East, rising fuel costs, and persistent consumer demand pressures.
Business South chief executive Mike Collins said the results reflected real conditions southern businesses were navigating at present.
‘‘Confidence has softened this quarter, and the data is honest about why.
‘‘The Middle East conflict has added a new layer of pressure on top of costs that were already stretched.’’
The Craic Irish Tavern co-owner Claire Grenfell said she was not surprised by the results.
She had noticed a big increase in the price they paid for gas and electricity, which were key costs in hospitality.
All of their products were freighted in, so most of them now had a surcharge, and their gas price had also risen about 40% over the past year.
Recent closures in the city, including Moiety and Velvet Burger, were making people nervous, Mrs Grenfell said.
She was also concerned about a lack of major events to stimulate the city.
‘‘With the cost of living crisis ... people are very careful with their discretionary dollar.
‘‘I think people are thinking about filling the car up as opposed to going out and having a big Saturday night.’’
John Swan Engravers owner Janette Armstrong said retail had never really bounced back since the Covid-19 pandemic.
‘‘Spending's down, cost of living's too high — especially with the cost of petrol and food — and people are just spending on what they can afford.
‘‘Also, with the election coming up, people are being really safe with their money and just holding back to see what happens.’’
The business was still doing memorial plaques and engravings as per usual, but its retail component had taken a 15%-20% hit.
Engravings for cups and trophies had the same demand as they did every year, as it tended to be the same clients.
Mrs Armstrong said they had not been hit as hard as other businesses.
‘‘When you look down the main street at 9am on a Monday morning, you don't see people out shopping, mate.’’
Dunedin Sheepskin Shop staff member Danni Cai was surprised business confidence was so low in Dunedin.
The George St business was pretty quiet until October through to March each year, when the cruise ships began arriving.
‘‘At the moment it's very, very quiet for the whole Dunedin businesses. People are not very confident on spending money on the extras like before.’’
The survey said there was still a lot going well in the South.
Tourism continued to deliver strong visitor numbers, the primary sector was performing well and many businesses were recording growth.
‘‘Southern businesses are adapting by investing in efficiency, exploring new markets, and backing each other through a challenging period.’’
