Australia's manufacturing sector has contracted for the sixth straight month, but at a slower rate.

The Australian Industry Group)/PwC Australian Performance of Manufacturing Index rose five points points to 45.3 in August, indicating the sector continued to shrink, although the rate of contraction had slowed.

A reading of below 50 indicates a contraction with the distance below 50 reflecting the strength of the decrease.

The private sector survey has shown a decline in activity for every month since March.

Ai Group Chief Executive Innes Willox said the index showed economic conditions, such as the high value of the Australian dollar, continued to have a negative effect on the sector.

"Manufacturing conditions continue to be very challenging across the sector with the high dollar and weakness in demand in the domestic and export markets weighing on growth," he said.

However, he said, there were some signs of improvement with the production sub-index lifting to 43.1, from 37.8, while the forward-looking new orders sub-index had risen more than eight points to 49.1.

Three of the 11 sub-indexes expanded during the month with food and beverages rising to 55.4, wood products and furniture rising to 54.1 and miscellaneous manufacturers jumping to 62.3