The BNZ-Business NZ performance of manufacturing index shows that the region leads the rest of the country with 58.5 points in May, up 5.1 points from the April reading.
A reading above 50 indicates expansion and below 50, contraction.
Otago-Southland Employers Association chief executive John Scandrett said yesterday the results were promising for local industry in general terms even if there were still some negative manufacturing sentiments being expressed. The negative feelings were in the areas of logging, machinery and equipment.
The key drivers behind the positive regional movement appeared to be mainly export-oriented and fell within the general food and beverage manufacturing areas, he said.
To some extent, the metal products and marine activity areas also helped with the improvements.
"It is interesting, even sobering, to look back at the May 2009 result for Otago-Southland which recorded a low-end 36.4 points. At that level, local manufacturing was clearly in contraction mode and the recessionary bite was being experienced by almost all in the sector," Mr Scandrett said.
The national index was 54.5 points. Regionally, northern was 48.3, central was 52.3 and Canterbury-Westland was 57.6.
BNZ senior economist Craig Ebert said that after some strong gains in recent months, May's index slowed to a moderate pace.
"As we suspected, she's likely to be a bumpy road to recovery."
The tempered New Zealand index reading coincided with the global index forming something of a peak during May as financial markets pared their optimism. There was a sense of taking stock in all of that, he said.
In the detail of the report, it appeared more the case of more components weakening than those holding up or strengthening.
Small firms "tripped" to 42.3 points but larger firms stood tall with 61.2 points.
By industry, five slipped to below the break-even point of 50 points.
"What we're left with is a much more mixed picture by way of the slicing and dicing compared to the more concerted momentum evident earlier in the year."
Arguably, the bigger thing to monitor was the international situation, even with signs that the world manufacturing bounce-back was peaking, Mr Ebert said.
If nothing else, the world's manufacturing activity and expectations of the sector, might be dampened by the renewed ructions doing the rounds in financial markets.
"We'll be watching the next batch of global manufacturing index results with this in mind.
"While we still believe the fundamental path is one of continued recovery - internationally and domestically - we're also of the opinion it will probably be a bumpy one rather than of the strong and sustained variety so often seen post-recessions," he said.
