Nationally, the seasonally adjusted BNZ-Business NZ performance of manufacturing index (PMI) for March was up 2.7 points on February at 56.3, the highest level of overall activity since November 2007.
Business NZ's executive director for manufacturing Catherine Beard said the New Zealand results mirrored global manufacturing data, as well as showing levels of expansion not seen for some time.
"However, it was still important to remember that ongoing solid results are required to catch up what has been lost over 2008-09," Ms Beard cautioned.
A PMI reading above 50 indicates expansion and below 50 contraction.
Otago had rebounded from 37.6 points in March last year to 57.6, its highest March reading since 2007.
Otago-Southland Employers Association chief executive John Scandrett said Otago-Southland had moved up from 49.5 in February to 57.5 in March and was "pacing favourably" with the northern and central New Zealand sectors, while the Canterbury region, at 58.6 points, led the country, despite dipping slightly from its February result.
"We have now seen positive returns in the survey around the [Otago-Southland] new orders, production levels and in particular the deliveries of raw materials diffusion indices. This is indeed good news," he said in a statement.
While the number of negative comments filtering through the local PMI returns had backtracked against February's result, some wood and paper, textile and clothing industry sources "clearly still retain levels of concern on business expansion that has been slow to materialise alongside other groups within the sector".
Ms Beard said after six months of solid "if not spectacular expansion", manufacturing had reached a phase where monthly results were consistent, and new orders continued to drive activity which she hoped would flow through to increasing employment, if the trend continued.
"At best, any recovery is seen as patchy, and there remains considerable uncertainty, although there is a general air of optimism for further pickup in the second half of 2010 and beyond," she said.
Bank of New Zealand economist Doug Steel also saw strengths and weaknesses in the PMI data.
The strength of the Australian economy and higher interest rates, which have seen the Australian dollar well bid against the Kiwi dollar, were helping drive New Zealand's recovery - "a win-win for New Zealand manufacturers supplying the Australian market".
Higher incomes breed an expanding market and the lower New Zealand dollar helped make Kiwi products more competitive against their Australian equivalents.
"However, we need to be mindful of the risks associated with increasing dependence on effectively one market, especially in light of the China-driven commodity boom," he said in a statement yesterday.
