Manufacturing in Otago and Southland has stabilised during the past three months and remains in expansionary mode, but not all sub-sectors are benefiting and further expansion may be under threat.
Despite domestic prosperity, Australia's cooling economy may yet set the tone for 2013.
Nationally, for July, the manufacturing index rose 4.3 points to 59.5, while Otago-Southland also rose, up 1.5 points to 54.7 for July, its third consecutive month in expansion.
In the monthly BNZ-Business New Zealand performance in manufacturing index, rankings above 50 reveal expansion, and below that, contraction.
Otago Southland Employers' Association chief executive John Scandrett said May produced a ''strong result'' at 60.7, followed by 53.2 in June.
Otago-Southland had settled within a consistent performance band on the expansionary side of the index.
''The July outcome at 54.7 points presents comfort that selected regional operators are, despite economic headwinds in other sectors, able to anchor stability across manufacturing activity,'' he said.
While the July report presented positive responses on textile and clothing activity and equipment and machinery performance levels, Mr Scandrett said ''conservative views'' were expressed across food and beverage and wood products activities.
''The survey responses remain mixed ... with different operators in the same sector presenting variable reports on how well they are performing,'' he said.
In the Otago-Southland sub-indices deliveries were at 65.6 points, revealing strong selling during July, but Mr Scandrett said near-future activity ''may not necessarily align positively with continuing expansion''.
BusinessNZ's executive director for manufacturing, Catherine Beard, said that the overall July result gave further impetus to a continuing trend of a sector in good heart during 2013.
''Unlike the lacklustre results during the middle part of 2012, the 2013 results have not only held up, but have improved since the start of the year,'' she said in a statement.
Positive comments from manufacturers rose to 67.3%, highlighting an increase in foreign and domestic orders, plus an uplift in the general economy, Ms Beard said.
However, while domestic manufacturing outlook appeared good, developments overseas had to be considered, in particular Australia which took 21% of all merchandise, but where the economy was ''rapidly cooling''.
''The value of New Zealand exports to Australia fell 9% last year, including a 9% fall in the value of manufactured goods,'' Ms Beard said.
Economic analysis from Australia predicts economic growth at 2.2% this year, markedly slower than the 3.6% recorded last year, she said.
''Slower Australian growth is likely to remain a drag on the New Zealand economy and our manufacturers, in particular,'' Ms Beard said.
