Manufacturing activity has fallen for a second consecutive month as the winding down of the car industry overshadowed a big fall by the Australian dollar.
The Australian Industry Group's Performance of Manufacturing Index (PMI) fell 0.8 points to 46.5 in September.
The reading below 50, indicates a fall in manufacturing activity.
Ai Group chief executive Innes Willox said it will take some time for the impact of the lower Australian dollar to be felt in the manufacturing sector.
The Australian dollar has dropped from 94 US cents in early September to around 87 US cents.
A lower exchange rate helps makes Australian exports cheaper and increases the competitiveness of locally-made goods with imported goods.
"While businesses welcomed the significant correction in the value of the Australian dollar in September, it will take some time before competitiveness in domestic and export markets improves," Mr Willox said.
"Respondents to the Australian PMI suggested that the winding down of Australian automotive assembly and the ongoing downturn in mining construction activity are dampening demand for locally-made products and components."
Mr Willox said falls in sales and new orders underpinned the further slowing of manufacturing in September and have left the sector struggling short of the tentative recovery in July.
In July, the index was 50.7, the first monthly increase in manufacturing activity in eight months.
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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