Following hard on the heels of a slew of negative data this week highlighting recession fears, Otago mirrored the national trend with its lowest overall manufacturing result in 14 months and its worst-ever result for the month of March since the survey began six years ago.
Otago Southland Employers Association chief executive described the Otago and Southland downturn as ''the end of the golden summer'' for southern manufacturers, who last year had often been punching above their weight in the survey stakes.
''This is the worst local March result since the survey began in 2002. It confirms that manufacturers are not only battling with ongoing cost pressures, but are also becoming increasingly pessimistic about the business outlook in general,'' Mr Simpson said.
Earlier this week, the New Zealand Institute of Economic Research reported a 33-year low in business confidence, prompting economists to predict a ''serious crunch'' was on the way for the economy amid other research predicting an average of listed companies' profits may dip
to zero growth during the year.
With inflation already exceeding the Reserve Bank's preferred outer threshhold of 3%, and data due next week expected to show inflation on the increase, pressure is on the bank to retain its current interest rates, already the highest in the developed world.
This is one of several factors making life difficult for manufacturers amid a deluge of escalating costs.
McKinlay's Footwear director Graeme McKinlay said a recent seasonal boost in sales has underpinned one of the company's best manufacturing periods in almost a decade.
However, labour shortages, stock costs and the amount of inventory held remained prime concerns.
''It's the nature of the industry that things can come to a screaming halt,'' he said when contacted yesterday.
It had become increasingly difficult during the past six years to attract staff to factory manufacturing jobs and in the past two years materials had increased anywhere from 15% to 40%, he said.
''We are a lot more conscious of the amount of stock held these days,'' he said.
A manufacturing index reading above 50 indicates expansion and below 50, a contraction.
Nationally, the index fell from 51.8 in February to 48.3 in March, while Otago's overall index has slipped from 58.8 in January to 52.4 in February, suffering a further fall to 46.3 in March, indicating a contraction.
''At about six points down each month - we won't want to see that happening for too much longer,'' Mr Simpson said.
Three of the five main manufacturing indexes indicated declines and only one of the five regions, Canterbury-Westland, remained in expansion, its figure down, nonetheless, on the previous month's.
Mr Simpson said while the food processing sector in the southern region was the best-performed, he noted the increasing cost of dairy products was ''likely to take its toll'' in future surveys.
BNZ economist Craig Ebert said said there were new influences affecting the manufacturing sector aside from the strength of the New Zealand dollar, cost and resource pressures and weakening domestic demand.
''There is another factor worth noting - offshore demand. It is slowing already and will probably continue to do so for the foreseeable future,'' he said in a statement yesterday.
New Zealand's largest trading partner, Australia, was showing signs of an slowing economy ''loud and clear'', despite its buoyant economy and resources boom, while the United States, the country's second-largest trading partner, was now entering a ''consumer-led recession''.
Consumer confidence had fallen in recent months and the labour market was showing signs of weakening.
''This promises to be the straw that breaks the back of consumer spending , which will be the most important for the global economy,'' Mr Ebert said.
