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The southern decline in the BNZ-Business-NZ performance of manufacturing index was also reflected nationally, declining 2.6 points from December to sit at 51.6 points.
Scores over 50 reflect expansion, and below, contraction.
Otago Southland was in the high 50s from October to November, then slid to be on the fence by December and has dipped to 42.6 points for January — less than in January last year and at its lowest since June 2015.
Otago Southland Employers Association chief executive Virginia Nicholls said the proportion of positive comments had dropped to 56%, also mirroring the national trend.
"Manufacturers are often affected by the holiday period, so I’m not concerned with this decrease in expansion," she said.
Otago Southland’s sub-index of new orders was steady at 50 points but deliveries declined to 47.4 and production and employment were low at 36.8 points, she said.
BusinessNZ’s executive director for manufacturing, Catherine Beard, said while the January expansion decrease was not ideal, it was clear a number of factors played a part.
"Those who outlined negative comments noted the Christmas/holiday break playing a sizeable role in reduced activity, as did weather conditions," she said.
However, those making positive comments reported more business as usual. Mrs Nicholls said the southern construction industry was reporting positive sales, along with metal products and equipment manufacturing, but food and beverage manufacturers reported lower sales, which was not unusual for that time of year.