Australian manufacturing activity deteriorated further in May recording its lowest reading since September 2011, according to a survey released on Friday by the Australian Industry Group (Ai Group).

The Australian Industry Group/PriceWaterhouseCoopers Australian Performance of Manufacturing Index (PMI) fell 1.5 points to 42.4 in May.

Readings below 50 indicate a contraction in activity with the distance from 50 indicative of the strength of the decrease.

The latest survey found only three of the 12 sub-sectors expanded in May. They were: paper, printing and publishing, machinery and equipment and miscellaneous manufactures.

The poorest performing sub-sector was construction materials, falling to 37.6 points.

Ai Group Chief Executive Innes Willox said the difficulties facing manufacturers intensified in May.

He said the Reserve Bank of Australia's 0.5 percent interest rate cut in May and the slip in the Australian dollar over recent weeks should have positive impacts on the manufacturing sector in the next few months.

"Nevertheless, these factors were swamped in May by renewed household caution in the face of international and domestic uncertainties and weakness in residential and commercial construction," Willox said in a statement accompanying the survey' s release on Friday.

"The fundamental structural pressures facing non-mining trade- exposed industries such as manufacturing continued to bite," he said.