Manufacturing contracts for 14th month THE decline in Australia's manufacturing sector has extended into a 14th month as falling selling prices and a strong currency hit hard. The Australian Industry Group performance of manufacturing index fell 1.2 index points in March to 44.4 points. The index has been below the key 50 level, which separates expansion from contraction, since February 2012. Australian Industry Group chief executive Innes Willox said it was a disappointing result given there were some encouraging signs in the February report, where the index rose 5.4 points. "The strong dollar, falling selling prices, further cost pressures and the weakness of commercial and residential construction continue to take their toll," he said. Mr Willox said an interest rate cut from the Reserve Bank of Australia on Tuesday would support the sector. "In the absence of any sign of inflationary pressures and with market interest rates still relatively high, the industry would certainly welcome a further reduction in official interest rates," Mr Willox said. Wood and paper products was the only sector to expand in February, while activity in all other sectors contracted. Manufacturing exports fell for the eighth straight month and selling prices declined amid rising costs. "This falling trend in selling prices indicates that widespread price discounting is probably still occurring, as manufacturers seek to compete globally in a very weak demand environment and against ongoing strength of the Australian dollar," the report said. The continuing gap between input prices and selling prices is contributing to a worsening profit squeeze in manufacturing. The report was based on responses from about 200 companies from a rotating sample of manufacturers.