Australia’s construction industry remains in decline but there are signs of improvement.

The Australian Industry Group/Housing Industry Association Performance of Construction Index rose 2.0 points to 46.2 in March.

The index remained below the 50 level that separates expansion from contraction but the rate of contraction was milder than in February.

Further signs of recovery in commercial construction and consolidation of recent gains in the house building sector were outweighed by a further decline in engineering construction and apartment building, Ai Group director of public policy Peter Burn said.

“As is the case with the broader economy, the rebalancing of the construction sector as mining-related activity slows still has a considerable way to go,” Mr Burn said.

HIA chief economist Harley Dale said it had now been three months of contraction for the index, despite promising signs at the end of last year.

But it should be a healthy year for new home building activity, he said.

“What the sector and broader economy needs, however, is a sustained recovery in new home building commensurate with average construction levels being considerably higher over coming decades than those achieved over the past 20 years,” he said.