Economic confidence in Otago, Southland among highest

Levels of economic confidence in Otago and Southland are among the highest in the country while Otago households have posted a third consecutive quarterly rise.

All 11 regions in the Westpac-McDermott Miller regional survey had higher levels for the quarter to December.

Otago was in third place on 50, Southland second-equal with Nelson-Marlborough-West Coast on 51 and first place taken by Gisborne-Hawkes Bay at 52, meaning that 52% of household respondents were optimistic economic conditions would improve, as opposed to pessimistic.

Unlike recent business surveys, which have been more scathing about the country's economic outlook, household surveys have generally been more upbeat.

Westpac chief economist Dominick Stephens said a net 50% of Otago households expected the economy to improve over the coming year, up from 42% recorded in the quarter to September survey.

"The southern part of New Zealand continues to outperform, with confidence in Otago and Southland among the highest in the country,'' Mr Stephens said.

The "upbeat mood'' in Otago and Southland was largely because of accelerated population growth, rapidly rising house prices and elevated construction activity.

"Conducive weather conditions are also likely to have boosted the production of grapes in Otago, with positive knock-on effects for wine exports,'' he said.

Expectations for the summer tourist season and the spending bonanza which accompanied it were also likely to have loomed large, when the 1555 respondents completed the survey in early December.

In Southland, confidence "nudged slightly higher'' for the quarter, a net 51% of household expecting the regional economy to improve in the coming year, Mr Stephens said.

"Households in this region are among the most optimistic in the country with current levels sitting way above the five-year average.''

In part, this reflects the strength of the housing market. As in Otago, Southland had had strong population growth. The combination of low interest rates and relatively affordable housing was key to house prices accelerating.

"A lack of housing stock has also boosted residential construction activity while non-residential building has benefited from the redevelopment of the Invercargill CBD,'' he said.

Mr Stephens cautioned that slightly weaker prices for meat and dairy might have dampened sentiment in some areas.

The survey sought consumers' views on their own economic situation

and summarised responses to questions including how respondents viewed their own financial situation, their willingness to buy a major household item and the national economic outlook.

The consumer confidence index for Otago increased from 113 in September to 115 in the December quarter. Southland was almost unchanged, quarter to quarter, rising 0.1 to 106.

"More consumers in Otago now expect the New Zealand economy to improve over the coming year and are feeling pretty optimistic about their own financial circumstances,'' Mr Stephens said.

"This upbeat outlook might help explain why consumers in the province show a greater willingness to purchase a large ticket item than in any other region.''


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