The service sector is still doing it tough, according to the latest results of a "performance of services" index collated by Business NZ and the BNZ.
The "Performance of Services Index" for August stood at 47.9, down 1 point from July and the second lowest result since thesurvey began in April last year.
If the index is above 50 then the sector is generally expanding, below that it is declining. The average rating since the survey began is 54.2.
Business NZ Chief Executive Phil O'Reilly said comments from respondents highlight the key challenges facing the sector.
"A general lack of consumer confidence is keeping hands firmly in pockets when it comes to spending decisions. Also, businesses are keeping a closer watch on what they spend with some contracts ending up being cancelled. Others have found operations particularly difficult, with sales turnover at their lowest levels for some years and certainly nowhere near previous business activity.
There had been a more dramatic seasonal impact this year too, after persistent spells of bad weather.
Head of research at the BNZ, Stephen Toplis said the service sector was facing the burden of ongoing financing costs.
Bank of New Zealand Head of Research, Stephen Toplis, said the service sector was facing the burden of ongoing financing costs. Last week's 50 point cut in the Official Cash Rate would provide some respite. There was hope that borrowing costs "may now be approaching a peak"
Business NZ says most regions saw a contraction during the month. There was little change in the North Island from the previous month.
In the South Island, the Canterbury/Westland region fell back into contraction after three months of slight expansion.
