The services sector is still going through a soft patch with businesses remaining unwilling to commit to hiring more staff due to the relatively flat economic outlook.
The Australian Industry Group's Australian Performance of Services Index (PSI) was up 1.7 points to 49.3 in July.
A reading below 50 indicates the sector is contracting. The lower the number the faster the contraction.
Ai Group chief executive Innes Willox said the services sector was hovering on the cusp of growth after a couple years of weakness.
"Businesses will be encouraged by the pick-up in sales and new orders," he said.
"This could be a sign that uncertainties over budget measures and the fall-off in demand for business services connected to slowing mining-related construction are fading in relative importance.
"At this stage, however, services businesses will need more solid evidence of an uplift and they are not yet at the point of adding staff."
Only three of the nine sub-sectors recorded increases in activity in July.
They were health and community services, finance and insurance, and accommodation, cafes and restaurants.
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