Economic confidence in Canterbury takes a tumble but expected to rebound in 2022

Wednesday, 26 January 2022

With Canterbury’s soaring housing market, economists expect the region’s economic prospects to rebound over 2022.

Canterbury households seem to have taken the threat of Omicron harder than most, with economic confidence in the region plummeting.

Canterbury households were among the most confident in New Zealand in September 2021, but fast-forward three months to December and fewer were expecting economic conditions to improve, according to a Westpac McDermott Miller regional economic confidence survey.

The survey showed Cantabrians shared a more pessimistic economic outlook, with 7 per cent net confidence, down 18 points on the September quarter.

The drop in confidence was second only to Northland, which dropped 29 points.

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Canterbury Employers’ Chamber of Commerce chief executive Leeann Watson says it is a challenging and disruptive time for many.

Regional economic confidence reflects the difference between the percentage of survey respondents who expect economic conditions in their region to improve and those who expect prospects to worsen over the next 12 months.

The dip in confidence was most noticeable in regions that had been until recently relatively happy with their lot, the report said.

“We suspect that reflects the looming prospect of the Omicron variant spreading throughout the country, and thus putting at risk the freedoms that those in the regions have become accustomed to.”

Westpac acting chief economist Michael Gordon said Covid cases in Canterbury and the threat of Omicron would have weighed heavily on Cantabrians’ minds over the quarter.

Jill Allan, owner of Fairlie's Paca Shack, talks about the heartache of having to sell her alpaca herd and property in the wake of the collapse of tourism in the Mackenzie district of South Canterbury. (First published October 2021)

He said poor growing conditions had also likely put a damper on the otherwise strong agriculture sector.

In contrast, the region’s housing market surge continued over the quarter, with house prices posting the highest nationwide gains over 2021.

Gordon said Westpac expected the region’s economic prospects to rebound over 2022.

Canterbury Employers’ Chamber of Commerce chief executive Leeann Watson said the Canterbury figures were probably to be expected because the business sector was not feeling overly confident right now.

“It’s a very challenging and disruptive time particularly for those in the hospitality sector and tourism and manufacturing because of the supply chain issues.”

But she said economic activity in Canterbury was stronger compared to the rest of the country.

In contrast to Canterbury's results, economic confidence in Otago jumped 10 points – the highest increase nationwide.

But Westpac warned the pickup was likely to be temporary.

“The lifting of Aucklanders’ travel restrictions would have accounted for much of the improvement particularly given the timing coincided with the height of the Central Otago tourist season.”

Record meat returns would have further boosted confidence, the survey said.

But the Omicron outbreak was likely to cut short the tourism season, and with no word on the opening of the borders, the region’s tourism-related businesses were set for another tough year, the report said.

Southland topped the confidence chart in the December quarter with a net 14 per cent of households still expecting their economy to improve in the coming year.

“The agriculture sector is firing on all cylinders with both farmgate milk and meat prices at record highs.”

Northland sat at net -25 per cent, Bay of Plenty at -7 per cent and Auckland and Nelson/Marlborough/West Coast were all sitting at -4 per cent.