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23/1/2019 — General
Economic and confidence left in South
By Simon Hartley

Economic confidence in Otago and Southland is among some of the highest levels across the country - with Otago households posting a third consecutive quarterly rise in confidence.

All 11 regions in the Westpac-McDermott Miller regional survey rose for the December quarter.

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 September quarter survey.

“The southern part of NZ continues to outperform, with confidence in Otago and Southland among the highest in the country,” Stephens said.

The “upbeat mood” in Otago and Southland was largely down to 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 1,555 respondents did the survey in early-December.

Stephens said in Southland, confidence “nudged slightly higher” for the quarter, with a net 51% of household expecting the regional economy to improve.

“Households in this region are among the most optimistic in the country with current levels sitting way above the five year average,” he said.

In part this reflects the strength of the housing market. As with Otago, in Southland there had been strong population growth, and the combination of low interest rates and relatively affordable housing were key reasons why house price gains had accelerated.

“A lack of housing stock has also boosted residential construction activity while non-residential building has benefited from the re-development of the Invercargill CBD,” he said.

However, Stephens cautioned that slightly weaker prices for meat and dairy may have dampened sentiment in some areas. The Westpac-McDermott survey also sought consumers’ views on their own economic situation.

The consumer confidence survey summarised responses to questions including how respondents viewed their own financial situation, their willingness to buy a major household item and the outlook for the national economy.

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

“More consumers Otago now expect the NZ economy to improve over the coming year and are feeling pretty optimistic about their own financial circumstances,” 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,” he added.

*Simon Hartley is senior business reporter and assistant chief reporter for the Otago Daily Times.

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Dominick Stephens.