Service sector activity lifted slightly in May but remains in a weak state.

Business New Zealand's performance of services index, or PSI , stands at 49.1, up 0.2 points from April but 9.4 points lower than the same time last year.

A PSI reading above 50.0 indicates the service sector is generally expanding, but below 50.0 indicates it is declining.

The average PSI value since the survey began is 55.7.

Business NZ chief executive Phil O'Reilly said there was both positive and negative news in the latest result.

"It's encouraging to see the index has not shown a worse result than April and that the Northern and Canterbury/Westland regions have improved to show minor expansion," he said.

But the May result was still the second lowest result recorded, and comments from respondents clearly highlighted the impact of the slowing economy while costs increased.

Mr O'Reilly said a halt in the decline of a global PSI survey would provide a template locally for the months ahead.

BNZ senior economist Craig Ebert said the strong declines in the retail sector warned of a recession taking hold through the wider economy.

"Last Friday's retail figures confirmed in our minds that underlying activity is not just moderating, but going backwards at an increasing rate of knots.

"And today's Performance of Services Index would seem to back this up, with its retail trade and hospitality categories clearly remaining the weakest links."

The various service sectors served up a mixture of expansion and contraction during May's PSI.

Retail trade slipped to 46.1 while accommodation, cafes and restaurants continued to fall to 36.1. However, health and community services and property/business services showed healthy growth at 56.8 and 56.1 respectively.

Wholesale trade bounced back from April to 51.2.