Services sector rises marginally

The services sector grew marginally in May as domestic demand continued to lag and new orders fell for the first time since January.

The NCB services PMI recorded 50.5 for the month, just above the 50 mark that separates expansion from contraction.

"The NCB services PMI is consistent with the flattish outlook that the official CSO data have shown with regard to domestic demand – unemployment down marginally from 14.7 per cent to 14.6 per cent, consumer confidence falling once again and retail sales flat in the quarter to April," said NCB chief economist Brian Devine.

Total new business was down for the first time in four months, as Ireland's fragile economic conditions continued. The index fell from 50.6 to 48.2 in May.

However, exports continued to provide support to Irish businesses, with new export business rising in May at a reading of 54.4. "The rate of expansion was solid, and was broadly similar to that seen in the previous month," NCB said.

Employment in the sector fell modestly, after the slight increase recorded in April. NCB said the decline - from 51.1 to 48.8 - mainly reflected a decrease in new orders. The sector has seen employment fall in 38 of the past 39 months.

Higher fuel costs also had a impact last month, with input prices rising as a result. The rate of inflation was the slowest since January, however, at 54.7 compared to last month's reading of 55.7 and 59.3 recorded in March.

Profits at Irish service providers fell in the three months to May, and many companies were unable to pass on the higher charges recorded last month to clients due to increased competition, with prices actually falling during the month.

"Output charges declined at a sharp rate that was the fastest in four month," NCB said. "There were also reports that customers had requested discounts over the month."

However, the survey noted that optimism remained solid, despite a slight dip in May, with companies planning to expand into new markets to tap into stronger overseas demand.

The survey covers all private sector services in Ireland apart from retail and wholesale, and includes data from around 600 companies.