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Urban Areas Still Feeling An Economic Chill - Westpac Report
- Westpac says the most regional economies remain in a cold snap
- Agricultural export regions doing better than cities
- On scale ranging frosty to hot, four regions manage midpoint cool, seven either frosty or cold
- But the headwinds are easing, and economic temperature will warm up
The agricultural sector will likely carry the economy for a good part of this year, until lower interest rates filter through to boost spending and activity.
Westpac Bank's latest look at regional economies has none better than cool - the mid-point rating on a scale between frosty and hot.
Only four regions, mainly in the South Island, were rated as cool. Five, including Wellington and Auckland, were described as cold, and the bottom rating of frosty to Waikato and Northland.
Senior economist Satish Ranchhod said little had changed for many regions since its last report, but he insisted something of a thaw could be expected as headwinds ease.
"Regions with strong rural backbones or links to the international tourism sector are starting to warm up, especially those in the south including Canterbury, Otago and Southland."
The report was based on the level of employment, house prices, building consents, retail sales and consumer confidence in each region.
Cold in the city
Ranchhod said it was an uneven recovery, with urban areas feeling a real economic chill, while overall conditions remained tough and the benefit of falling interest rates had yet to be felt, although there was a growing sense of optimism.
"Many businesses also told us that while conditions remain challenging, they aren't going backwards like they did in recent years.
"More businesses are also starting to feel optimistic about where the economy was headed over the coming year, thanks mainly to the easing in borrowing costs."
Cost of living pressures remained to the forefront even with inflation falling back into the Reserve Bank's target band, with households still feeling the squeeze on budgets, and businesses were reporting higher costs and pressures on their profit margins.
The jobs market remained soft with firms shedding staff, and people headed to Australia particularly in the construction sector.
Ranchhod said the tariff war was adding uncertainty to the outlook and causing businesses to watch and see what might eventuate.
"That uncertainty is one factor why businesses are likely to be cautious about major capital spending for a time yet. The related drop in the New Zealand dollar has been welcomed by exporters, but is adding to costs for other businesses."
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