Australian economic woes have started to hurt New Zealand manufacturers and the sector experienced a lower level of activity in April, despite still showing overall expansion.
The seasonally-adjusted BNZ-BusinessNZ Performance in Manufacturing Index (PMI) was 51.8 in April.
A reading above 50 indicates manufacturing is generally expanding and below 50, it is declining.
The April result was down 2.8 points on March and close to January's reading.
However, the unadjusted regional readings were disappointing for Otago and Southland.
The regional level was down to 41.9.
Canterbury-Westland topped the regional indices at 54.7, followed by northern on 48.4 and central also on 41.9.
Otago-Southland Employers Association chief executive John Scandrett expressed his disappointment at the latest results.
''Just when we felt the signs were indicative of forward expansion in the sector, we have to face the reality that a number of local operators have experienced a downturn in April manufacturing activity.''
The April new orders, raw material deliveries and finished stock sub-indices readings were weak when compared with the previous two months.
They presented the proposition of widespread contraction being felt across key PMI-contributing organisations, he said.
As usual, there was a mixed bag of sentiment and, despite the negative net outcome, the region experienced some strength in selected food and beverage, textile and machinery performance.
The slippage appeared to have been felt in wood and paper and metal products manufacturing, and the degree of downturn had been sufficient to tip the overall PMI into contraction, Mr Scandrett said.
BusinessNZ manufacturing executive director Catherine Beard said the comments from respondents provided a useful picture of why the level of expansion dropped from March.
Although the proportion of negative comments for April at 43% did not increase significantly from March, there was a distinct pattern of respondents mentioning the current economic situation across the Tasman.
Some outlined the high value of the New Zealand dollar relative to the Australian currency, while others mentioned the general lacklustre Australian economy causing lower demand for New Zealand products.
BNZ senior economist Doug Steel suggested the lower April figure could be subject to the influence of Easter and Anzac Day holidays this year. May's results would help clarify that.
Tightening conditions in some primary sectors were also filtering through to the manufacturing sector, he said.
The near $7 billion reduction in annual revenue the dairy sector was currently dealing with was always going to bring some knock-on effects - including for the manufacturing sector.
It was no surprise to see some PMI respondents noting reduced demand from the agriculture sector.
Likewise, lower oil prices, while welcomed by consumers, were seen negatively by some manufacturers as they detected less demand from the energy sector for their products, Mr Steel said.
However, there was also ''decent'' economic growth. April's PMI represented the 31st consecutive month of sector expansion.
''It fits with manufacturing employment growth over the past year. Latest official figures show a net gain of nearly 16,000 manufacturing sector jobs over the past year to March.''
The 6.6% annual growth was double the rate of employment growth for the economy as a whole.
At a glance
• Otago-Southland PMI slips to 41.9 points.
• New Zealand PMI down to 51.8, still expanding but at slower rate.
• Australian economic woes part of the problem.
• Employment in manufacturing had increased to its highest level since 2008.
