The performance of manufacturing index [PMI] found Otago and Southland’s manufacturing sector for May was at 50.3 points.
A PMI reading above 50 indicates that manufacturing is generally expanding; below 50 that it is declining.
For April the PMI fell to 20.8 points — the lowest since the index began recording in 2002—and in March it was at 35.2
Otago Southland Employers Association chief executive Virginia Nicholls said new orders were encouraging, scoring 61.1 and production levels and deliveries of raw materials were at 50 in the index.
Stocks of finished products and employment levels were in decline, she said.
"There is no doubt that these are challenging times for manufacturers," Ms Nicholls said.
"In this tough environment, we would like to see a reduction in the regulatory burden on business." The index found food manufacturers were slightly ahead of their pre-Covid figures, with steady sales in supermarkets, and food service was still behind.
"There are mixed reports coming from food exporters, some are experiencing steady sales, and others are struggling as their customers are not fully open or are still closed."
Forestry exports were a mixed bag. The supply chain was filling but operators were waiting to understand what future demand will look like, Mrs Nicholls said.
Machinery and equipment manufacturers were busy catching up after lockdown, but forward orders had fallen away.
The proportion of positive comments lifted from 19% in April to 50% for May.
"There are concerns around aircraft capacity for international air freight which is not able to meet demand," Mrs Nicholls said.
The vocational training fund was described as a well-targeted response to the Covid crisis and had been welcomed by business.
"The targeted training and apprenticeships fund will pay the learning fees for many areas of vocational training for the next two and a-half years, in addition to wage subsidy support for apprentices and trainees during 2020."
The policy will help with the skills development pipeline and help prevent a fall in apprentices, often the result of economic downturn, Mrs Nicholls added.
Exporters were watching closely the start of the UK negotiations towards a free trade agreement with NZ.
However, exporters were disappointed with progress on a European Union FTA with New Zealand.
