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The subdued result is also overshadowed by rising concerns over Brexit, with the possibility of a hard landing for Britain come decision-making time in late March.
Manufacturing across the two provinces was in decline from a high of almost 60 points in October, steadily declining before Christmas to below 50 points, before hitting 43.5 points for January, the latest BNZ-BusinessNZ manufacturing index showed.
Points above 50 denote expansion, and below 50, contraction.
Otago Southland Employers' Association chief executive Virginia Nicholls said January's 43.5 points reflected the same downward trend experienced during this time of the year, for each of the past three years.
''Many businesses mentioned the effect of the Christmas shut-down,'' she said.
In the regional breakdown in categories, while employment levels and new orders were still in expansion at 53.8 points, production levels, stocks of finished products and deliveries of raw materials were all in decline below 50, Mrs Nicholls said.
''The hot summer weather over the holiday break was good for some food manufacturers,'' she said.
The proportion of positive comments from southern businesses was sitting at only 36% and staff shortages also continued to be a concern for employers, Mrs Nicholls said.
''It's possible that the UK could abruptly leave the European Union on March 29.''
A hard Brexit and no transition period raised risks for New Zealand exporters who provide perishable products, through potential delays at customs.
''All New Zealand products currently exported to the European Union will face uncertainty until the terms of the UK exit are known,'' Mrs Nicholls said.
Nationally, the seasonally adjusted manufacturing index was 53.1, which was 1.7 points down from December, and below the long-term average of 53.4.
BusinessNZ's executive director for manufacturing Catherine Beard said while the January result looked fairly similar to 2018's results, there were aspects which needed to be watched in future months.
The main sub-index values, new orders decreased its level of expansion for a third consecutive month to 52.2, the lowest since December 2017.
She said the proportion of positive comments for January, at 47.7%, was down considerably from December's 60.6% and November's 60.1%.
''However, seasonal factors such as Christmas and summer holidays were evident throughout the comments,'' Mrs Beard said.