Manufacturing across the country remains in the doldrums with four consecutive months of decline, reflected in Otago with three months of decline and softening export figures.
The poor southern result was a "worrying trend", given that manufacturing was traditionally at this time of the year expected to deliver increased levels of output, not a decline, Otago Southland Employers Association chief executive Duncan Simpson said.
"This is the worst local August result since the survey began in 2003," Mr Simpson said.
He blamed rising production costs and the weakening New Zealand dollar for Otago's decline on the index, compounded by the slowing economy and the "back wash" from the global credit crunch, sparked by ongoing turbulence in the United States housing, bank and sharemarket sectors.
"Several manufacturers have seen export activity slow because of the trends in the US," Mr Simpson said.
Yesterday's surprise 50-basis-point cut to the interest-driving official cash rate by Reserve Bank Governor Alan Bollard was welcome, to release some increased spending power to consumers and for the likelihood of lower interest rates for company loans, he said.
The southern decline was reflected in businesses reporting they were "managing their way through unsold stock" and the lessening demand meant that instead of employing people for increasing production the companies were not hiring, and in a small number of cases letting some staff go, Mr Simpson said.
Index readings above 50 indicate expansion and below 50 indicate falling manufacturing.
Nationally, the indices for manufacturing production stood at 42.3, new orders at 44.4 and employment at 45.4 - all declining with production and employment returning their lowest records in the monthly performance of manufacturing index, released by the BNZ and Business New Zealand yesterday.
In Otago, the overall manufacturing index was up slightly from July's 47.5 at 48.9, which a year ago stood at 56.0.
Mr Simpson said there was some "slight consolation" other regions had fared worse than Otago, but he pointed out that while 68% of manufacturers nationally reported negative comments about business conditions, almost 73% of Southern respondents were negative on conditions.
Southern sentiment may have been unduly affected by the recent news of 145 redundancies at Cadbury Confectionery and the imminent loss of a total 430 jobs with the closure of the Fisher and Paykel Appliances Mosgiel plant by early next year, he said.
