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Otago has slipped one place to second on the ASB Regional Scoreboard but it still recorded a strong result.
ASB chief economist Nick Tuffley said it seemed the region could not get enough workers, having added more than 6% additional jobs over the year.
"Local retailers also had an excellent quarter with annual growth ranked third in the country.
"We are a touch sceptical that the activity levels can be maintained. With the peak tourist season coming to an end, we’re interested to see how much additional growth the region is able to accommodate."
Tasman took the top spot on the index, up from second in the last quarter, and like Otago, it has five stars, meaning the economy is "steaming".
The South Island dominated the scoreboard for the December 2017 quarter as four of the top five spots were claimed by southern regions, Mr Tuffley said.
Marlborough was the quarter’s biggest mover, jumping seven spots to third place. The region led the nation with its construction industry growing at the fastest rate in the country.
The reopening of Kaikoura’s road link late in the quarter helped boost the region’s retail sales, and the trend was likely to continue.
"We expect Marlborough’s retailers to see a further pick-up in sales in early 2018."
Nelson climbed three places to fifth spot and the region’s strong housing market played a key role in the shift, he said.
Nelson’s annual house sales growth led all regions for the quarter, reflected in the wider region’s consumer confidence which was sitting at the highest level in the country.
After a brief respite last quarter, Auckland slipped back into the bottom half of the scoreboard. On the positive side, the super city’s construction industry continues to grow and total building consents were up 22% for the year, Mr Tuffley said.
The number of cranes dotting the Auckland skyline set a record high over the quarter.
However, Auckland was one of only three regions experiencing both falling house prices and house sales. And now, Auckland’s "halo effect" was starting to act in reverse. There were weaker rankings for most northern regions as their housing markets slowed alongside that of Auckland.
Northland’s annual percentage fall in house sales was the largest dip in the country.
"We suspect this stems from a similar weakness experienced by neighbouring Auckland."
Waikato’s housing market was also soft during the December 2017 quarter.
Wellington and Canterbury were poised to climb the rankings over 2018. Wellington was another big mover over the quarter, climbing six places to 10, Mr Tuffley said.
In particular, the capital’s labour market was strong throughout 2017 and the city remained the only major centre with a still-hot housing market.
There has been good news on several fronts recently that might lead to an acceleration in Canterbury’s activity this year, Mr Tuffley said.
"The reopening of the Kaikoura road link is likely to boost activity in the Canterbury region. This, paired with the green light for several flagship rebuild projects, is likely to further boost confidence and business activity in Canterbury in the coming quarters."
Southland climbed four spots to nine in the latest ratings. On the back of the solid result, ASB added another star, taking the region to a three-star, or stable economy rating.
The shining light for the region had been the accommodation sector. Growth in guest nights was the highest in the country in the past year, he said.
This was probably partly due to the spillover from Queenstown into Te Anau.
The region also topped the nationwide car sales growth for the year.
"From here, we think Southland can continue to climb the scoreboard."
The lift in the milk price had started to improve dairy sector cash flows. The sheep sector sector was also experiencing "very healthy" lamb prices.
There would be a temporary spanner in the works from the summer drought but beyond that, the region was set up to outperform, Mr Tuffley said.