The manufacturing sector was subdued in October, although the pace of decline slowed during the month, according to the latest industry survey.
The Australian Industry Group - PwC Australian Performance of Manufacturing Index (Australian PMI) showed the seasonally adjusted index rose 2.1 points to 49.4, remaining just below the critical 50-point level separating expansion from contraction.
Manufacturers again cited the strong Australian dollar and sluggish domestic demand as having an impact on growth.
A strong rebound in activity across clothing and footwear and machinery and equipment was not enough to offset the steep decline in the textiles sub-sector, which was largely related to weak consumer confidence and a shortage of skilled labour.
Food and beverages and wood products and furniture also remained in the red. Across manufacturing, production levels and employment rose in October.
Australian Industry Group Chief Executive, Heather Ridout, said: "Manufacturers continue to be inhibited by strong overseas competition amid the strengthening Australian dollar, soft domestic demand and an intensification of skill shortages. While not confined to the west, skill shortages are particularly acute among WA manufacturers.
The industry also remains wary of the impact of interest rate rises at a time when strong competitive pressures are ensuring that inflationary pressures remain moderate,” Ms Ridout said.
PwC Global Head of Industrial Manufacturing, Graeme Billings, said: "The manufacturing sector continues to be weighed down by intense overseas competition, and this will be exacerbated by the strong Australian dollar. These circumstances present substantial challenges for manufacturers who must continue to search for business efficiencies and innovation opportunities.
"There are, however, reasons to be cautiously optimistic about the near term prospects of the sector. Production in the clothing and footwear, construction materials and machinery and equipment sub-sectors rose strongly in October despite the overall fall in new orders.
“This suggests that businesses expect a pick-up in demand over the coming months," Mr Billings said.