Australia's manufacturing sector continues to witness retreating indicators well into the third quarter the current year, according to the National Australia Bank's (NAB) latest Manufacturing Activity Index.

Basing on NAB's latest numbers, production by the manufacturing industry dipped by nearly one percent in the September quarter and the sector itself saw its overall share to the general Australian economy sliding below the 10 percent mark.

Those levels, according to NAB chief economist Alan Oster, coupled with the dismal results posted by the sector during the June quarter conspired to a declining business confidence in the industry, which plunged by 11 percent in the quarter.

The gloomy picture permeates the whole industry, Oster said, and companies have started downsizing measures to cope with the situation, like in the cases of steel manufacturers BlueScope and OneSteel.

According to The Herald Sun, both steelmakers laid off a total of 2000 employees, with the two firms citing not-so-good trading situation in the immediate past quarters.

Oster added that sub-sectors of the industry appear to be the most hurt by the sustained contraction as both activities and confidence levels on those segments suffered cut backs that rattle many players.

Stalling construction growth, the NAB index said, pulled down outlooks and outputs in non-metallic minerals segments such as cement, ceramics and glass; as well as in wood and paper and printing.

NAB conceded that the high value of the Australian dollar and the dwindling export market sparked much of the industry woes, with the bank adding that lesser orders and higher production cost seem to be crippling many industry players.

"The message is: some time in the last three months manufacturing's been hammered," Oster told the Herald Sun on Wednesday.

Amidst the difficulties, Oster said that achieving some form of turnarounds or at least staying afloat lie on the shoulders of manufacturers, which he stressed should all the more remain firm and find ways in taking advantage of mining boom now underway.

Innovation and the ability to adjust and implement changes are keys to survival, Oster added.

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