Otago had previously been in the mid-range of the 16 regional council areas.
ASB senior economist Jane Turner said Otago climbed up the rankings thanks to very strong retail sales data. The report showed Otago's retail sales up 6% in the quarter to $735 million.
House price growth in the region had also outstripped all but Auckland.
''The influx of All Blacks have got to live somewhere,'' Ms Turner said.
Otago house prices rose 5.2% in the quarter to an average of $314,000.
While most data pointed to a steady expansion of the local economy, employment data had been very weak over the last year. The scale of the decline in employment was questionable but clear, the labour market remained soft, she said.
The employment statistics showed some improvement in the fourth quarter and it was hoped the region could maintain that this year.
''Most signs point to steady expansion in the Otago economy over the last year, pushing the region up near the top of the rankings. Retail sales growth has been a particular highlight, and there have been some robust house price increases as well. The labour market remains weak and while the size of the decline in employment is questionable, employment growth remains the region's Achilles' heel.''
Auckland topped the ranking, supported by strong population growth and a buoyant housing market, Ms Turner said.
''The housing market is still characterised by a lack of supply, which is driving up prices. At some point, construction will probably respond to evident housing demand and higher prices. But this has so far failed to materialise. Residential construction activity was slightly lower in December 2012 than in the same period in 2011.
In all other respects, the fourth quarter was good for Auckland. After soft results in September, employment and retail sales in the region bounced back strongly. Consumer confidence also remained among the highest in the country, she said.
Canterbury's resurgence continued with the region moving into second place in the rankings and joining Auckland on four stars.
With rebuilding activity sparking the local economy back into life, a declining population over the two years since the earthquakes was the one weak spot, Ms Turner said.
The lack of available housing in the region continued to restrict sales and was pushing house prices up rapidly. That would likely ease over the next year or so as more supply came on line.
Southland slipped towards the bottom of the rankings as the December quarter produces an apparent slow down in the region, she said.
Retail sales had been on a long-term decline in the region and that continued in December.
Employment was also soft and commercial construction failed to maintain the relatively strong levels seen in later 2001 and early 2012. New car sales did increase in late 2012 with some farmers perhaps choosing to ''invest'' the proceeds of last season's good production levels, Ms Turner said.
At a glance
• Otago climbs to third place in the rankings.
• The region has experienced very strong retail sales activity over the past year
• House price growth was surpassed only by Auckland and Canterbury
• Employment figures remain weak
