A private survey shows the construction industry continued to shrink last month, and conditions for the sector appear likely to keep deteriorating.

The Australian Industry Group - Housing Industry Association's Performance of Construction Index fell by 2.6 points to 36.2 in January.

That is well below the 50-point mark that would mark growth in the industry.

The Ai Group says residential construction fared the worst in the month.

"Commercial and residential construction are still contracting and, with further falls in new orders reported in January, the slump looks set to continue," said the Ai Group's director of public policy, Peter Burn.

"The impacts are being felt not only by the businesses and employees directly involved in the industry, but also across the broader economy as industries in both the services and manufacturing sectors feel the pinch from the prolonged sluggishness in house, apartment and commercial building."

Peter Burn says the continued weakness in residential and commercial construction is being exacerbated by the imminent downturn in mining investment.

"Additional pressures on the broader construction industry are now also coming from slowing activity in the engineering construction sector as public-sector demand and mining-related activity eases," he added.