Activity in the services sector fell at a much slower rate in September, thanks to improvements in sales, new orders and supplier deliveries.

The Australian Industry Group Australian Performance of Services Index (PSI) rose 8.1 points to 47.1 in September.

A reading below 50 indicates the sector is contracting. The lower the number the faster the contraction.

Health and community services was the only sub-sector to record a rise in activity in the month.

Ai Group chief executive Innes Willox said cautious consumer spending continues to hamper growth in accommodation, cafes and restaurants, as well as retail trade.

“Business and consumer confidence appears to have lifted since the federal election in early September, but benefits in terms of actual sales and activity to date are muted,” he said.

“The strong lift in our new orders sub-index for Australia’s services sectors is promising, but it needs to improve further if it is to translate into a real lift in local activity.”