Services sector contracts in December

The services sector contracted for the first time in a year in December, a new survey said today, as new orders fell sharply.

The NCB Purchasing Managers' Index blamed fragile economic conditions and poor business confidence for the fall to 48.4 from the 52.7 reading in November.

The decline in new orders, which slipped from 52.6 to 47.4 last month, indicates further trouble ahead for struggling businesses.

"With new orders falling sharply, more contraction in the services sector can be expected in early 2012 as the domestic part of the economy remains extremely weak," said NCB chief economist Brian Devine.

Confidence dipped to the lowest level seen since the bailout by the EU and IMF was announced in November 2010, as companies anticipated difficult operating conditions due to the economic difficulties.

However, the export sector remained in growth, recording 52.1 for December, following the 52.2 reading in November.

"Once again, the export component remained above 50 and ultimately, like for the economy as a whole, this will be sufficient to outweigh the drag from domestic demand in 2012 to ensure a positive GDP number," Mr Devine said.

But he warned that the two-tiered economy would continue, with employment likely to fall and gross national product expected to be flat.