The Irish services sector showed the slowest pace of growth in more than two years in July, but the sector seemed to shake off the expected impact of the Brexit vote.

The Investec services purchasing managers' index showed moderate growth during the month at 59.5 in July. That was lower than June's 61.2 reading but remained above the 50 mark that separates expansion and contraction.

Rise in new business

Although there was a weakening in new business for the second consecutive month, the index showed twice as many panellists reported a rise in new business in July as those that posted a fall. The new export business section of the survey grew at a faster pace than in June, with the impact of new orders from Continental Europe and Asia outweighing any perceived slowdown from the United Kingdom in the wake of the vote to leave the European Union.

Employment in the sector grew, but the pace slowed to its weakest in three years.

Average input costs continued to rise at a sharp pace, although they slowed from June and the impact of the fall in value of sterling against the euro benefited some companies. Average prices charged also rose, and the profitability index continued to grow at a solid pace, Investec said.

Activity expectations

The portion of the index that measures expectations for business activity recovered in July after hitting a 34-month low in June, a result that Investec said was surprising given the backdrop of Brexit.

“With that being said, within this index we note that the only monitored segment within the four (technology, media, telecommunications – TMT; business services; financial services;and travel and leisure) that comprise the services sector to have seen an improvement in sentiment was TMT, with the others all reporting a less optimistic outlook than in the run up to the referendum,” said Investec’s Philip O’Sullivan.