Key Points:

Manufacturing activity contracted for the fifth month in a row, a survey published today shows.

The five months of decline recorded by the Bank of New Zealand-Business New Zealand performance of manufacturing index (PMI) is the longest period of contraction since the survey started in 2002.

For September it recorded a seasonally adjusted 47 points, 1.3 points higher than the month before. A reading below 50 indicates manufacturing activity is contracting.

Business NZ chief executive Phil O'Reilly said the record period of contraction showed little sign of easing going into the last quarter of the year.

"Recent turbulence in the financial markets is having a flow on effect to other areas of the global economy, including manufacturing," he said.

The global PMI was contracting at its fastest rate since 2001 as most of the world's largest manufacturing bases faced tough operating conditions.

The ripple effects were likely to be felt in this country for some time to come, as economic uncertainty bit into new orders and firms looked to reduce staffing levels, said O'Reilly.

While a recent fall in the NZ dollar against the US currency would be welcomed by exporters, that movement was tempered by increases of the kiwi against the Australian dollar.

Unadjusted activity for September showed a contrast between the North and South Islands.

In the North Island, the northern region remained in contraction for the ninth consecutive month at 45.9, while the central region on 46.2 was at a similar level to August.

In the South Island, both regions showed recovery last month, with Canterbury/Westland rebounding from August to 51.6, while Otago/Southland showed expansion for the first time since May with 53.9 points.