Australia's vast services sector has stabilised, but remains in contraction and conditions are mixed across subsectors.
The Australian Industry Group's Performance of Services Index (PSI) rose 0.2 points to 49.7 points in April.
A number below 50 indicates the sector is shrinking, but the higher number shows the rate of contraction was slower than in March.
New orders and deliveries rose in April, but sales contracted, inventories were run down further and the employment index declined, indicating labour demand remained weak.
"The large and diverse services sector trod water in April," Ai Group chief executive Innes Willox said in a statement on Wednesday.
The report said retail trade expanded for the first time in six months, while the finance and insurance and health and community services subsectors also grew strongly in April.
Transport and storage services and property and businesses services stabilised, although both subsectors still shrank.
Weaker demand led to a decline in sales growth in accommodation, cafes and restaurants, pushing that subsector into contraction.
The recent rebound of the Australian dollar may have tempered growth in personal and recreational services subsector, which also shrank over the month as well.
Communication services returned to contraction in April after it looked to be recovering in March, following several years of decline.
Service providers in the sector cited weak sales and new orders, and concern about reports of lower government spending and economic uncertainty.
Wholesale trade turned from expansion to contraction over the month, with the subsector reporting intensifying competition and lower sales drivers.
"The results also indicate that the large services sector is still facing very mixed conditions," the Ai Group report said.
Mr Willox said conditions were likely to remain mixed ahead of the federal election, but the sector was set to stabilise further this year.
"The combination of the Reserve Bank's interest rate cut and the pro-investment business tax measures announced in the budget last night is likely to boost confidence and services sector activity over coming months," Mr Willox said.
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