The services sector is moving slightly closer to growth but weak consumer demand is dampening progress, despite the fact that Christmas is around the corner.
The Australian Industry Group Australian Performance of Services Index (PSI) rose 0.8 points to 47.9 in October.
A reading below 50 indicates the sector is contracting. The lower the number the faster the contraction.
Finance and insurance expanded last month, as did health and community services, for the fourth month in a row, while selling prices improved for the first time in two years.
But retail trade, wholesale trade, accommodation, cafes and restaurants, and personal and recreational services continue to reflect weak consumer demand in the lead up to Christmas, as employment insecurity and the high Australian dollar makes overseas travel and offshore online shopping more attractive, the report said.
"October saw further signs of the services sector clawing back towards growth," Ai Group chief executive Innes Willox said.
"However, conditions remain fragile with slippage in both sales and new orders recorded after a promising recovery in September illustrating that weak consumer demand is holding back growth.
"With the Australian PSI in negative territory since the start of 2012, there is clearly a long way to go before our service industries make up for the weak conditions that have prevailed over the past two years."
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