When the hose is used the cleaner looses suction and the hose contracts. what could be causing this?
There is a blockage in the hose somewhere. Disconnect all of the hose sections (make note of how they all fit back together) and check each one individually for blockages. The straight sections can be done visually by looking through them towards a light source, e.g. a window.
The hose section can also be inspected visually if you compress the stretchy part into a straight line and also look towards a light source. If you can't see light through any section, you have probably found the blockage.
Pay particular attention to the point where the hose enters the vacuum at the back near the bottom. After releasing the hose from this connection, also check inside the fitting that the hose attaches to the hoover.
Once you have found the blockage you will need some kind of rod to remove it. This may be easy or difficult depending on where the blockage is. Basically, you need something about 2 feet long, fairly thin, stiff, straight and - most importantly - blunt ended so it will push the blockage out (rather than pierce through it) and also will not damage the flexible hose. I generally use a section of wooden dowel.
Once you have removed the blockage, reassemble the sections of hose and you should have suction again.
Hope this helps. Please post back if you need further assistance.