Manufacturers say the first rise in sales in a year masks continued weakness in the sector.
Official figures showed a 0.2% rise in sales in the March quarter, but once dairy and meat products were excluded that turned into a 6.5% decline - the biggest quarterly fall since June 1994.
Manufacturers and Exporters Association chief executive John Walley says conditions have worsened for his members since the end of March.
Economists also say the manufacturing sector is still weak. BNZ economist Craig Ebert says there is little sign yet of an economic recovery flowing through to local manufacturers.
Mr Ebert says dairy cooperative Fonterra's selling spree of milk powder stocks explains a 23% surge in sales of meat and dairy products in the March quarter.
Westpac economist Doug Steel says the figures paint a depressing picture of a sector slipping back at a "great rate of knots" and predicts the growth in dairy will not be sustained. He says a recovery for the sector is not predicted until at least later in the year.
Sales dropped in 12 of the 14 sectors surveyed by Statistics New Zealand, with five industries recording falls of $100 million or more. Transport equipment and structural, sheet and fabricated metal products were the weakest sectors, losing a combined total of $400 million of sales.
The value of seasonally adjusted manufacturing sales fell 0.9%, reflecting falls in transport equipment and structural and metal product manufacturing.
A Reuters poll indicates economists think the New Zealand economy will shrink by 0.9% in the first three months of the year, matching the decline in the fourth quarter.