In a surprising shift, the bottom of the South Island has shown remarkable economic growth, surpassing Auckland to become the leading region in New Zealand for the first part of the year. According to ASB’s regional economic scoreboard, Southland’s robust performance has been driven by significant gains in construction and housing activity. However, the overall outlook for the rest of the year remains cautious due to various economic challenges.
ASB Regional Economic Scoreboard Insights
The ASB regional economic scoreboard evaluates regions based on year-on-year growth across several indicators, including employment, building consents, and retail sales. The latest report revealed a mixed economic landscape with modest increases in house prices and a slight uptick in retail spending, counterbalanced by a cooling labor market and soft migration figures.
Key Findings:
Construction and Housing Activity: Southland’s economic ascent has been largely driven by strong construction and housing activity, making it the best-performing region in the country in these areas.
Tourism and Migration: Despite some positives, tourism underperformed for another quarter, and annual net migration fell below 100,000 for the first time since May 2023.
Inflation: There have been small gains in building consents and easing inflation, providing some economic relief.
ASB Chief Economist Nick Tuffley commented on the mixed results, highlighting both the strengths and ongoing challenges faced by the regions. He noted that while Southland and Otago have performed well, Auckland and Wellington have faced setbacks.
Southland’s Economic Performance
Southland experienced a substantial gain of 10 places on the growth scoreboard, knocking Auckland off the top spot. The region’s strong performance was primarily attributed to:
Construction and Housing Activity: Southland led the country in these sectors, contributing significantly to its economic growth.
Farming Conditions: Favorable farming conditions relative to other parts of New Zealand have helped boost revenues and confidence in the region.
Tuffley anticipates that Southland’s positive trajectory will continue into the next quarter, supported by its thriving construction and agricultural sectors.
Otago’s Steady Growth
Otago held steady in second place, underpinned by:
Housing and Employment: Strong performance in these sectors contributed to Otago’s stability.
International Tourism: The return of international tourists has bolstered the region’s economy.
Auckland’s Decline
Auckland’s drop to fifth place reflects several economic challenges:
Population Growth and Consumer Confidence: Despite strong population growth and high consumer confidence, Auckland’s economic growth has been middling.
Net Migration and Spending Adjustments: With net migration peaking and Aucklanders adjusting their spending to cope with higher mortgages, further declines in economic performance could be possible.
Wellington’s Challenges
Wellington slipped a couple of places to 10th due to:
Government Spending Cuts: Reduced government spending has negatively impacted the region’s economic growth.
Employment: Wellington experienced the only fall in employment in the country, further contributing to its lower ranking.
Looking Ahead
Tuffley cautioned that while there are some positive signs, the overall economic outlook remains subdued. He pointed out that the fog of economic uncertainty is unlikely to lift until 2025, meaning New Zealand has several more challenging months ahead. The mixed performance across regions highlights the diverse economic landscape and the varying impacts of broader economic trends.
In summary, while Southland’s impressive performance has shifted the regional economic balance, ongoing challenges in other regions, particularly Auckland and Wellington, underscore the complex and evolving nature of New Zealand’s economic landscape.
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