The August BNZ-BusinessNZ performance in services index shows the region languishing at 36.9 points where below 50 indicates an industry in contraction and above 50, expansion.
Otago-Southland Employers' Association chief executive John Scandrett said the last index made for grim reading.
"It's difficult to digest the fact that this represents the lowest figure seen since June 2008 and especially since it comes to hand at a time within which media attention is heralding the economic spin-out benefits associated with the start of the Rugby World Cup."
Weather woes throughout August appeared to have dented already struggling local retail activity and while some upper-end accommodation demand remained strong, there were very mixed results tabled across the full range of tourist-related offerings, he said.
Tourist numbers overall appeared to be substantially down on comparable previous periods and destination and facility choice seemed to be sharply focused across a narrow range of options.
"Back in June, we incorrectly predicted an upswing in service sector activity through July and beyond. We admit to again being disappointed that the anticipated gains are yet to be reflected in the service index results."
Given the activity levels associated with the Rugby World Cup, it was hard to imagine there would not be an improvement when the September results were published.
But the current fragile activity, sales and new business markets remained a concern in the south compared with northern regions, Mr Scandrett said.
Nationally, the PSI reading was 53.9 points. BusinessNZ chief executive Phil O'Reilly said the August result was helped by ongoing solid results for new business and sales.
The northern region had 57.4 points in August, Canterbury-Westland had 56.5 and central was 55.9.
