The servicing sector contracted in the south last month, despite expanding in the rest of the country.
The BNZ Capital-Business New Zealand Performance of Services Index (PSI) for Otago in September was 45.6, while the Northern Region recorded 55.8, Central 50.4 and Canterbury Westland 51.5.
The national figure was 53.2, up 1.9 points from August.
An index above 50 indicated the sector was expanding and below 50 that it was contracting.
Otago Southland Employers' Association chief executive John Scandrett said the September result was a sharp reversal from that of August, when the region recorded an index of 58, and a return to the two previous months when the readings were 44.8 and 43.7.
He attributed the fluctuation to the performance of some tourist businesses falling short of expectations and weak general demand for services as consumer demand was influenced by their perception of economic conditions.
"It is frustrating to again see fluctuations here in the South at a time when the national trending patterns are building to reflect solid forward momentum on service sector buoyancy."
The result was also counter to recent expansion in the manufacturing index for Otago-Southland.
Nationally, the September 2009 PSI index was 6.3 points higher than September 2008, but 5.8 points lower than September 2007.
The average PSI for 2007 was 58.1 and 49.1 for 2008.
To date, 2009 has averaged 47.3.
Business New Zealand chief executive Phil O'Reilly said that nationally, businesses were gaining momentum from the approach of Christmas, improving weather and people feeling confident about spending.
The more forward-looking new business-activity component of the PSI was continuing to edge up and should filter through to activity and sales during the last quarter of the year, he said.
BNZ Capital research head Stephen Topliss predicted the economy to expand at "an above trend pace" by the end of next year, driven by domestic and international growth.
The September index was driven by expansion of two of the five indices measured: activity-sales (58) and new orders-business (58.6).
However, employment (48), stocks-inventories (46.9) and deliveries (49.3) remained contracted.
Employment has now been stuck in negative territory for 19 months.
