The services sector, including retail and hospitality, is in a slump ahead of the key Christmas season, despite a boost from the much lower Australian dollar.
The Australian Industry Group's Performance of Services Index (PSI) fell 0.7 points to 48.2 points in November, staying below 50 for the second month in a row, showing that activity in the sector is falling.
In the four months to September, the sector enjoyed its longest period of expansion since the global financial crisis, with tourism and consumer services performing particularly well.
Respondents to the November PSI survey said that consumer spending has become cautious, with some indicating that recent rises in mortgage interest rates by the major banks are already hurting household spending, the report said.
Activity in the retail and hospitality sub-sectors fell, with many respondents saying trading conditions were flat or steady.
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However, other respondents said the housing sector is boosting activity for property, professional and financial services.
Ai Group chief executive Innes Willox said demand for services has become patchy.
"A timely reminder of the fragility of the domestic economy as it struggles to restructure and generate new sources of growth in the wake of the mining investment boom," he said.
"Retailers will be hoping for a rush in the next few weeks to make up for the slow start to the Christmas trading period."
Only four of the nine services sub-sectors grew in November: the finance and insurance sub-sector added an eleventh month of expansion, health and community services and hospitality expanded for a fourth month.
Personal and recreational services grew strongly in adding a second month of expansion.
