Otago Southland manufacturing spent most of 2017 in expansion, at times leading the country, but has been in contraction mode for both January and February this year.
Points above 50 on the BNZ-BusinessNZ manufacturing index denote expansion, and below 50 contraction.
Otago Southland eased back from 48.2 points in January to 46 points for February, while nationally the index struck 53.4 points for February, one point down on January.
Otago Southland Employers' Association chief executive Virginia Nicholls said sub-index production levels were at 50; new orders and deliveries of raw materials 47.2, employment levels 41.7 and stocks of finished products at 38.9.
"This is the lowest value recorded in the past 13 months, and is considerably lower than the average for the past year of 57 points," she said in a statement.
Mrs Nicholls said the Christmas holiday shutdown, along with more staff on leave, had delayed some manufacturers returning to full production.
While the overall index had fallen for the first two months of the year, Mrs Nicholls said manufacturer commentary was telling "a more positive story".
"The construction industry feedback was generally positive, with some holding solid forward orders," she said.
Others in that sector were coming to the end of some significant contracts and had some good inquiries for work in the future.
"Some are reporting a slow re-starting of construction activity for the year, which should resolve in the short term," she said.
Metal product manufacturing was positive, with good forward orders, while businesses manufacturing retail products for the tourism market were reporting good sales, Mrs Nicholls said.
BusinessNZ's executive director for manufacturing Catherine Beard said that while the manufacturing index remained in positive territory, the last three months had shown a levelling-off of expansion.
BNZ senior economist Doug Steel said while there was no doubt the manufacturing index had slowed in recent months, the February result was not weak, as it exactly matched the long-term average.
