Australian manufacturing contracted at an accelerating pace in September, with a significant drop in new orders leading the decline.
The Australian Industry Group's Performance of Manufacturing Index fell 1.2 points to 44.1 last month, with a reading below 50 indicating the industry is contracting - the further below 50, the steeper the fall.
Survey responses indicated that a pullback in mining-related activity, strong competition from imports (due largely to the high Australian dollar) and rising utility costs were among the factors negatively affecting manufacturing.
The three manufacturing sub-sectors which had expanded in August - food and beverages, wood products and furniture and miscellaneous - all fell back into contraction in September.
Textiles, clothing and footwear saw moderate growth (recording an index reading of 55.3).
Paper, printing and publishing posted the biggest surprise result, with a massive improvement from contraction in August to an index reading of 69.6 indicating strong growth in September.
However, New South Wales held its local government elections last month, no doubt increasing the amount of printing work on offer in Australia's most populous state.
The Ai Group's chief executive Innes Willox says the whole manufacturing sector is showing signs of extreme fragility.
"The softer conditions for manufacturers recorded in September looks like continuing in the months ahead with a sharper decline in the forward-looking new orders sub-index," he observed.
"Suppliers to the mining sector, which have generally been a source of encouraging news in recent years, reported sharp falls in new orders as the mining sector responds to reduced prices and an increased likelihood of reductions in demand." He says that should open the door for more interest rate reductions in the coming months.
"The ongoing strength of the Australian dollar, together with further rises in wages and input costs and a continuation of reported falls in selling prices, exacerbated the squeeze on margins that has been evident for some time," Mr Willox added.Â "There are certainly no signs of any inflationary pressures that might inhibit further reductions in interest rates."