The Otago-Southland PMI reading slipped to the lowest in New Zealand at 39.8 points, down on the 47.5 recorded for the region last month and 10 points down on the national result.
A reading of above 50 in the BNZ Capital-Business NZ PMI indicates expansion and below 50 contraction.
"It is disappointing to see a reversal of the positive PMI movement seen last month but, as mentioned then, we did expect to see continued volatility in the local manufacturing sector for some time."
Of the five diffusion indices addressed in the PMI survey process, four were weaker against the June readings.
Employment and production readings were down markedly, he said.
The finished-stocks result remained buoyant at 47.8 points but was not enough to improve the overall regional result.
The PMI employment pattern appeared to be aligning with the recently announced upswing in unemployment levels within the region.
In the June quarter, the unemployment in Southland went from 2.6% to 3.4% and in Otago from 4.4% to 5.3%.
Mr Scandrett suggested businesses should focus on a limited line-up of carefully selected, achievable goals.
Included in his suggestions were having management review the "if and how" of investing in the company's capabilities and looking at whether they had the best plan and equipment relevant to the business' operations.
Businesses should consider all investment opportunities connected to improving the skills of workers and review staff retraining needs.
"We can look at better ways of running an effective and efficient organisation - and, importantly, [ask] 'Can we see new market opportunities?"'
There was every chance of advancing the position of southern businesses if they reviewed those tasks, while acknowledging the key broad productivity driver components of innovation, enterprise, skills, investment and natural resources, he said.
