The Performance of Manufacturing Index [PMI] for Otago and Southland came in at 38.9 points in May, up from 20.8 in April.
A PMI reading above 50 indicates that manufacturing is generally expanding; below 50 that it is declining.
Otago Southland Employers Association chief executive Virginia Nicholls said every category in the index’s regional breakdown was in decline.
"The only category above 40 (and still in decline) is employment levels.
"The categories below 40 include production levels, new orders, stocks of finished products and deliveries of raw materials."
Manufacturers were able to get back to work when the country moved to Alert Level 2 halfway through May.
Many exporters were able to operate in Alert Level 3.
"There was an increase in operational costs due to the restrictions on how manufacturers were able to operate," Mrs Nicholls said.
"These extra costs included the need to have more staff per shift, extra costs from the supply chain and increasing freight costs."
The index held positive comments from food manufacturers supplying supermarkets.
The proportion of positive comments were slightly above last month but were still low, and are sitting at 19%.
Visas and their slow processing by Immigration NZ was causing headaches for employers, Mrs Nicholls said.
"We would like to see some consideration for migrant workers who are essential in a business, many who are on the pathway for residency to have their visas renewed."
She said Central Otago in particular was in a difficult position with the essential skills visa.
"Some businesses are not in a position to provide the minimum of 30 hours per week at the moment, and would like an exemption to provide less hours in this challenging time for both the business and the migrant workers."
The Government wage subsidy was praised as a "saviour" for businesses, enabling them to keep people employed.
The extended wage subsidy, which started on Wednesday for eight weeks, was also welcomed by business.
"This provides businesses who have had a reduction in turnover of 40% time to take a breath and to consider their future," Mrs Nicholls said.
Despite an appetite for shopping locally, restructures and redundancies continued across businesses of all sizes.
The index also said Government changes to the Resource Management Act to fast-track critical infrastructure projects was welcomed, but there were concerns about trade tensions between the US and China.
