The performance of services index (PSI) scored the region’s services sector at 35 points for June; a reading above 50 indicates that services are generally expanding and below 50 that it is declining.
The regional breakdown showed all categories were in decline.
The sector scored 33.5 in May and 12 in the lockdown month of April.
In June stocks and inventories, activity and sales levels, orders and new business, supplier deliveries and employment levels were all declining.
"This month we had 45% of positive comments, which is a small improvement on last month," Otago Southland Employers Association chief executive Virginia Nicholls said.
"There were significant impacts on the service sectors which are facing a period of readjustment, along with negative business sentiment in the tourism sector."
Businesses in the tourism industry were doing their best to "reconfigure their offerings for the domestic market".
She said operators were waiting to see if locals would visit outside weekends and school holidays. The PSI also found schools and tertiary institutions had lost significant revenue from international students not being in the country.
"International education is struggling, as it is not expected to be up and going again until our borders can safely open, or a plan put in place for well-managed isolation and quarantine," Mrs Nicholls said.
Retailers experienced better sales as shoppers returned to the main streets, with the enticement of free parking.
Covid-19 had accelerated some retailers’ plans to consolidate their bricks-and mortar stores, and accelerate their online operations, Mrs Nicholls said.
"The return of the first major Super Rugby event in early June brought more visitors to Dunedin, which led to a significant increase in transactions at restaurants and retailers."
The local film industry has genuine potential for growth, Mrs Nicholls said, and proposed shovel-ready facilities in Dunedin and Queenstown are well placed for any future international film productions.
"For some service providers there have been increasing wage and compliance costs and concerns with security of supply.
"Most are reviewing their costs, reducing overheads and reviewing any planned investment."
Another round of restructures and redundancies was expected at the end of the extended wage subsidy, Mrs Nicholls said.
