Nationally, the BNZ-BusinessNZ performance of manufacturing index (PMI) eased from 55.9 points to 54.7, while Otago slipped back from 52.5 in February to 51.7 in March.
Points above 50 show expansion and below 50, contraction.
While the national data was at its lowest level of expansion since October 2015, the manufacturing sector had been in expansion for almost all months since October 2012.
Chief executive of the Otago Southland Employers' Association John Scandrett said there had been strong feedback during March, centred on a good summer season and export order growth in boat-building and clothing and textile manufacturing.
"There were sluggish performance reports coming from machinery sales and some wood products operators.''
He said overall it was a "steady-as-she-goes situation'' in March.
However, not all Otago Southland's manufacturers were seeing positive outcomes, which was signalled through a slow-down in sub-indices readings in some areas of production and deliveries.
"New orders, in comparison, are positive and indicative, we think, of a lift in forward performance,'' Mr Scandrett said.
BNZ senior economist, Doug Steel, said while there were some conflicting signals in the details, the index indicated ongoing growth in the manufacturing sector overall.
"New Zealand's manufacturing index remains well ahead of many other major economy equivalents,'' he said.
BusinessNZ's executive director for manufacturing Catherine Beard said the March expansion dip was across all sub-indices and employment was in slight contraction for the second month running.
