Regional economic confidence plunged to multi-year lows in Northland, Waikato and Gisborne-Hawkes Bay and were falling sharply in Taranaki-Manawatu-Wanganui, according to the Westpac McDermott Miller regional economic confidence survey released yesterday.
''Drought has caused economic confidence to evaporate in the rural parts of the North Island,'' Westpac chief economist Dominick Stephens said.
While economic confidence in Auckland and Canterbury was down, overall they retained optimistic outlooks of 16% and 35%.
Auckland's optimism was underpinned by its ''surge'' in the house market, while Canterbury's earthquake recovery efforts were ''now firmly under way'', Mr Stephens said.
Separate retail data released yesterday showed stronger-than-average increases in Christchurch during the past year, which coupled with an easing in the national retail trend figures, have now closed the retail gap since the earthquakes hit.
Nationally, for the quarter to March, economic confidence expectations for the year ahead fell from 13% being optimistic to 5%. However,
Waikato, Northland, Gisborne-Hawkes Bay and Taranaki-Manawatu-Wanganui were all down and firmly entrenched in pessimism.
The entire North Island has been declared a drought zone, and some South Island West Coast areas are in the same predicament.
Southland had the largest change of any region, up 38 percentage points from -25% to 13% for the quarter, while Otago optimism was also up slightly.
Mr Stephens said although economic confidence in Otago remained below the national average, it had improved for the second consecutive time and was at its highest since September 2011.
'' A perkier global economy, low unemployment, and slowly improving property markets in Queenstown and Dunedin may be driving the gradual recovery in economic optimism,'' he said.
He said Southlanders' economic confidence rose from deep pessimism back to cautious optimism.
''The aluminium smelter at Tiwai Point remains embattled. But, unlike the North Island, Southland has enjoyed a stellar growing season, while benefiting from the surge in dairy pricescaused by the drop in New Zealand's overall milk production,'' Mr Stephens said.
In separate data released yesterday, Statistics New Zealand said Christchurch's retail activity had risen for a fifth consecutive quarter. After seasonal fluctuations were removed, total retail activity increased 1.3% in the quarter to December, compared with a 1.7% rise at the national level This quarter's increase in Christchurch was from a moderate increase in retail trade and a strong rise in accommodation and food services, up respectively 0.8% and 4.1%.
