Manufacturing activity fell for the third consecutive month in January, according to the latest industry data.
The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) was down slightly by 0.9 points to 46.7 in January.
Readings below 50 indicate a contraction in activity.
The seasonally adjusted Australian PMI remained in negative territory across all the major activity sub-indexes.
However, there was some improvement in new orders and employment with those sub-indexes contracting at a slower rate compared with December – 48.8 and 48.3 respectively.
Four sub-sectors recorded growth in January – food, beverages and tobacco (54.0), wood and paper products (61.9), petroleum, coal, chemical and rubber products (52.7) and non-metallic mineral products (57.6).
Production (45.2), stocks (40.1) and exports (34.1) were the weakest activity sub-indexes in January.
Australian Industry Group Chief Executive, Innes Willox said: “2014 looks to be another challenging year for many Australian manufacturers, although a handful of areas are showing some positive signs of growth.”
Non-metallic minerals, including key building materials such as glass, bricks and cement, has improved in response to the beginnings of a lift in residential construction. Some encouraging signs are also evident in food and beverages manufacturing and in petroleum and chemicals manufacturing, possibly due to the lower Australian dollar over recent months.
“But our other large manufacturing sectors continue to struggle, despite the lower dollar and low interest rates, said Mr Willox.
“Muted local demand and a difficult export market means they are in no position to assume the lead in generating alternative sources of growth as the mining investment boom fades through 2014.
“We urgently need to invest in a more balanced and diversified growth path to smooth this transition and manufacturing will continue to play a key role in any such strategy.