Southern manufacturers faced some critical months ahead as manufacturing activity across New Zealand continued to dive, Otago-Southland Employers Association chief executive Duncan Simpson said yesterday.
The regional manufacturers were doing comparatively better than some of their northern counterparts but many were in the position of having "fragile forward orders".
Manufacturers who had clients in the United States were finding their orders drying up as the global recession hit.
Mr Simpson was commenting on the latest Bank of New Zealand-Business New Zealand performance in manufacturing index (PMI).
"Some exporters in the sample have a very low forward order position but have continued production, albeit at reduced levels, in the hope this will improve. This clearly can't carry on much longer, unless there is a significant change in offshore conditions."
The local index reading was 51.6 in November, down from 54.2 in October and well down on the 70.2 recorded in November last year.
The national PMI plunged to a seasonally adjusted record low of 35.4, down 7.9 points from October. That was the seventh consecutive monthly fall.
A PMI reading above 50 indicates that manufacturing is generally expanding and 50 shows that it is declining.
Mr Simpson said the local index was being held up by high levels of finished goods and raw material stocks. Some domestically focused manufacturers were benefiting from seasonal demand.
"The seasonal surge, though, is at much lower levels than in typical Novembers."
The global manufacturing depression had well and truly hit New Zealand shores and with the global PMI standing at 36.4, New Zealand was in good company with other developed economies.
"Any sign of a sizeable lift in activity is against the odds in the coming months. The very poor November result also begs the question, just how low will overall activity fall? There's no clear indication we have yet reached the lowest point for this cycle."
Bank of New Zealand head of research Stephen Toplis said manufacturers were being battered on all fronts.
"First, they were beaten up by the rapid softening in domestic demand, led by the housing market correction. Now, they're also suffering from phase two of the recession, which involves a drop in demand for export product as recession grips the developed world."
There was no doubt that 2009 would be at least as difficult as 2008. For many, it would be a simple matter of survival.
New Zealand was now entering the second stage of a protracted, but so far relatively shallow, recession which was being driven by international events.
"We remain hopeful that 2010 will be a much better year, as the combined impact of substantial monetary and fiscal easing eventually pushes the economy ahead but, for many, between now and then will simply be a fight for survival."
