A PMI reading above 50 indicates manufacturing is generally expanding and one below 50 shows it is declining.
The index, along with the performance of services index, is published monthly by the Otago Southland Employers Association.
"During August we faced our first regional Alert Level 3 border in Auckland, which has had significant economic impact on our region," association chief executive Virginia Nicholls said.
"Our July figures looked like we were entering a recovery and it is concerning to see that this has been short-lived due to the change in the alert levels."
The index found in its breakdown of categories that production and new orders — two key indices — were in a deep contraction, ratings falling below 40 points.
"Stocks of finished products was the highest reading for all five indices (although still contracting), while employment continued to struggle, which is the case across the country."
Overall, there were 46% positive comments for August, which was a reduction on the previous month.
Manufacturers were concerned they were not able to recruit well and wanted more access to skilled and unskilled migrant labour.
The Government’s announcement last week allowing skilled workers and business owners back into the country "will be a relief to businesses who have valuable staff stuck outside the country due to Covid", Mrs Nicholls said.
The construction sector was steady, particularly with Government work, and funding for apprentices had been welcomed.
"The agricultural base in our region has meant that demand for our exports have held up reasonably well," Mrs Nicholls said.
"The summer fruit exporters are concerned that air freight is being consolidated out of Auckland," Mrs Nicholls added.
"This will add extra time on to the journey to connect with these flights."
The index also found aluminium boat manufacturers were busy.
Following some confusion in Auckland during its Level 3 lockdown, her organisation was advocating for work being allowed because it was safe — rather than essential — which was "a better approach that is risk based and centred on the ability to operate in a Covid-safe way, using the occupational safety and health framework, coupled with better traceability and border management".
"The definition of essential services should be dropped, instead focusing on the ability to operate safely."
She also pointed to Tiwai Point’s impending closure and the importance of securing its future for a little longer.
"It makes sense to retain the smelter at Tiwai Point for a longer timeframe.
"We would like to see the retention of this world-class operation in Southland.
"The team at Tiwai are true global leaders in the production of low-carbon, high-quality aluminium, something we are all proud of in the South."
