Manufacturing in Australia took a backward step in August, hurt by competition from imports, the high Australian dollar and caution among businesses.
The Australian Industry Group's Performance of Manufacturing Index (PMI) fell 3.4 points to 47.3 in August.
The reading below 50, indicates a fall in manufacturing activity.
In July, the index was 50.7, the first monthly increase in manufacturing activity in eight months.
Ai Group chief executive Innes Willox says the surge in housing construction is not flowing through to increased demand for locally-made goods.
"In part this appears to be due to higher levels of import competition and in part because the simultaneous reduction in engineering construction is detracting from demand in these sub-sectors," he said on Monday.
"More generally, manufacturers remain cautious about the outlook and continue to focus on reining in their costs, as they battle these weak trading conditions."
Mr Willox said many respondents to the survey expressed ongoing concern about the persistent strength of the Australian dollar, which has lowered demand for locally-made products.
Of the eight manufacturing sub-sectors, only the large food and beverages and the smaller wood and paper products sub-sectors expanded.
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