Australian manufacturing activity remained in a slump in March, with drops across all sectors and in most states suggesting the economy may slide further.
The Australian Industry Group performance of manufacturing index edged up 1.7 index points to hit 33.4 points in March, up from 31.7 points in February when it hit a 16-year low.
However, it marks the tenth consecutive month the gauge has been under the 50 point line separating expansion from contraction.
"The Australian PMI suggests that economic conditions have not bottomed in the economy and that the outlook remains uncertain," said AIG chief executive Heather Ridout in a statement. "Business is hunkering down and hoping that conditions will improve in the second half of the year. Whether they will, remains to be seen."
"Firms continue to point to weak domestic and global demand for manufacturers, including from China; project cancellations; lack of credit availability; and competition from overseas products as the prime causes of the downturn in manufacturing," the report said.
"Production, capacity utilisation and exports remain in the doldrums, with the new orders reading - although a little up from February - not indicating any early pick up," Ms Ridout said.
New orders rose by 3.3 points, seasonally adjusted, to 31.4 index points in March from 28.1 index points in February.
Although they were still under the 50 point mark for the 11th straight month.
Continued weakness in new orders "has driven the ongoing drop in manufacturing production over the past year," the report said.
Manufacturing activity dropped in all states except Tasmania where it rose slightly, the report said, with the largest falls in New South Wales and South Australia.
Employment by manufacturers also fell for the 13th consecutive month, although the rate of decline eased in March, rising 0.8 points to 33.6 index points from 32.8 in February.
"In unadjusted terms, employment expanded in no sectors in March, as in February," the report said.
czappone@fairfax.com.au
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