Nationally, manufacturing activity grew at its slowest pace in more than six years for May, barely staying in expansion mode, easing to 50.2 points.
Scores above 50 on the monthly BNZ-BusinessNZ index reflect sector expansion, and below, contraction.
Overall activity in Otago and Southland eased from 54.1 points in April to 53.2 points for May, just above the 12-month average of 52.
Otago and Southland Employers' Association chief executive Virginia Nicholls said the residential and commercial building sector was busy in the region, although the sector still had significant skill shortages.
"Food manufacturers were busy up until after Easter, and sales have started to fall off which is to be expected with the change in the seasons," Mrs Nicholls said.
Escalation in the US and China trade tensions concerned many respondents, she said.
In the southern regional breakdown in categories, employment levels were just above 60, and new orders are 53.6, while production levels, stocks of finished products and deliveries of raw materials were unchanged.
Nationally, the seasonally adjusted index for May was 50.2, which was 2.5 points down from April, and the lowest level of overall activity since December 2012.
BusinessNZ's executive director for manufacturing, Catherine Beard, said that the drop in activity to its lowest point in over six years was obviously a concern, especially when the sub-index values were examined.
Production, at 46.4 points, was at its lowest value since April 2012, while the other key sub-index of new orders, at 50.4, only just managed to stay in positive territory.
"Given the latter feeds through into the former, it does not instil a strong belief that the sector will show solid improvement over the next few months," Mrs Beard said.
