Town and country

In what has otherwise been a very light week of New Zealand and international data, the latest Westpac McDermott Miller Consumer Confidence Index and Regional Economic Confidence Survey shed some interesting light on the regional divisions in New Zealand’s economy, while providing more evidence that overall economic activity remains comfortably above trend.

We have been braced for the shock waves of dry weather and a low dairy payout to ripple through to confidence and economic activity in New Zealand’s rural regions. In that context, the latest survey results came as a welcome surprise. Consumer confidence in rural regions and smaller centres picked up noticeably after plunging in December, but has been fairly steady in the main urban areas of Auckland, Christchurch and Wellington.

The sense we get is that households in rural regions feared the worst back in December, when some were predicting that Fonterra would downgrade its farmgate milk price forecast to well below $5/kg and meteorologists were talking about emerging signs of an El Niño weather pattern. There may since have been a collective sigh of relief when reality didn’t turn out quite so dire.

Even on that reading, it’s fair to say that rural confidence has held up fairly well. While residents in the Waikato and Southland – two major dairying regions – remain distinctly less confident in their regions’ economic prospects and their own finances than they were six months ago, their overall level of consumer confidence has only fallen to around average levels, and their reported spending appetites have also stayed reasonably healthy.