The construction industry contracted for a third straight month in January, as the economy continues to struggle its transition out of the mining boom.

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Construction is one of the key industries that can pick up the slack left by the slowing mining sector, providing jobs which demand similar skills and fuelling economic growth.

The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index only rose by 1.5 points to 45.9. Anything below 50 points indicates a contraction in activity.

Housing Industry Association chief economist Harley Dale said the results were “unequivocally disappointing”, though he remained hopeful that activity would pick up in February thanks to the Reserve Bank cutting rates.

Ai Group director of public policy Peter Burn said the immediate outlook was “not encouraging”.

“The easing of activity in the residential construction sub-sectors that was evident in the closing months of 2014 continued in January with house building slipping sharply and apartment building activity easing again,” Mr Burn said.

“This, combined with the well-entrenched contraction in engineering construction and a commercial construction sector that remained in negative territory, saw overall construction activity fall for the third consecutive month.”

However, he also said this week’s cut in interest rates should boost activity, “even though the long-awaited pick-up in business and household confidence is yet to materialise.”