Persistent weakness in new orders and activity kept the Australian construction industry in negative territory for the sixth consecutive month in November, new data show.

The seasonally adjusted index fell 1.8 points to 42.2 in the month, according to the latest Australian Industry Group Australian Performance of Construction Index (PCI) in conjunction with the Housing Industry Association.

With private investment still unable to offset the dwindling government stimulus, apartment building, house building, commercial construction and engineering construction all contracted over the month. Market pressures also severely impacted selling prices with a drop of 11.7 points in the selling prices sub-index in November.

Australian Industry Group Director Public Policy, Dr Peter Burn, said: "The continuing weakness in the construction industry reinforces other reports about the patchiness of economic activity in the face of higher interest rates and the withdrawal of government stimulus measures. Weakness continues across the construction sector but is particularly evident in the residential housing and apartment sub-sectors. Expectations of further interest rate rises are having a significant impact on the sector.

"The continuing softness of activity in the construction sector comes on top of last week's national accounts data showing that the construction sector contracted by almost one percent in the September quarter which was consistent with Australian PCI measures of activity from July to September. At this stage, the Australian PCI is pointing to similar sluggishness over the December quarter," Dr Burn said.

Housing Industry Association Chief Economist, Harley Dale, said: "The evidence is unequivocal that the new home building sector is enduring renewed weakness. Those regions that hadn't already fallen over amidst on-going tight credit constraints were stopped in their tracks by the interest rate hikes of November. The accelerated decline in new orders for both detached houses and apartment building in November is very concerning.

"Reflecting a combination of dampened demand and perennial supply side obstacles HIA is currently forecasting a nine per cent decline in new home starts next calendar year, meaning a worsening of the housing shortage and further pressure on very tight rental markets. We recognise, however, the fast growing risk that the renewed downturn in new home building is sharper than that," said Mr Dale said.