In the Waikato, other signs of economic activity, such as electronic card spending, car registrations and building consents, had also lost their momentum in recent months. Given the importance of dairying for Southland's economy, the decline came as no surprise, it said.
Over the last six months the gloss had come off most regions, although optimists continued to outnumber pessimists in the three main centres, along with the Bay of Plenty, it said.
In Canterbury - the second-biggest dairying region - economic confidence rose in the quarter.
"Clearly, this is thanks to ongoing reconstruction activity, though Cantabrians' economic confidence has moderated from the dizzying heights of a year ago," Westpac said.
"That said, economic confidence has come off its peak at the start of the year, no doubt influenced by the weaker dairy outlook," Westpac said.
Economic confidence in Northland improved but remained subdued, due in part to lower dairy prices.
Aucklanders remained optimistic, but noticeably less so than earlier this year.
Confidence in the Bay of Plenty fell in the quarter but remained higher than in many other regions.
Further south, the Gisborne/Hawkes Bay region rose slightly in the December quarter, but remained well below where it was earlier in the year.
Economic confidence in Taranaki/Manawatu-Wanganui continued to slide but the fall was less severe than many other dairying regions.
In Wellington confidence fell for the second quarter in a row, but remained moderately optimistic.
In the Nelson-Marlborough-West Coast, economic confidence in the region plunged, with optimists barely outnumbering pessimists.
In Otago, confidence picked up a little but remained subdued.
