Growth in the Irish services sector hit an eight-month low in July as employment in the sector fell for the first time since January and volatility on world stock markets eroded business confidence, writes Conor Lally
The latest NCB Stockbrokers July purchasing managers' services index (PMI) reveals financial services was the only services sector that posted outright growth in July.
Levels of business activity fell across the board, with more than 75 per cent of firms surveyed saying business activity was either flat or in decline during the month.
The overall PMI was 52, down from 53.8 in June and 56.3 in May. An index of 50 denotes flat conditions, the more the index climbs above 50 the greater the rate of growth during the period under review.
Mr Eunan King, senior economist at NCB, said even though there had been a marked contraction in the level of expansion in the services sector in July, the month had still seen some growth. However, the period was marked by uncertainty, he said.
"Employment fell for the first time since January, though cost pressures and shortages of skilled labour were quoted as constraints in this context. Overall, the report reflects the increase in volatility of markets and a rise in uncertainty in general, which has characterised the last few months." Mr King said that, while the latest data revealed a slowdown in growth, they were not a cause for concern.
The financial services sector was the only sector to post a business activity index above 50 (at 50.7, down from 60.1 in June), with all other sectors reporting either flat or declining activity in the month.
The activity index for business services posted its first downturn since last December, falling to 47.4 from 51 in June. In the technology, media and telecoms sector, the index was 50, down from 52.1 in June. And in transport, travel, tourism and leisure the index was 46.5 in July compared with 43.2 in June.
Overall, 53.2 per cent of purchasing managers surveyed said they expected business activity at their company to have increased in 12 months, compared with current levels, down from 60.3 per cent in June.
While the business confidence index was 70.5, still well above the 50 no-change mark, if fell from 77.4 in June to an eight-month low.
"The relative weakness of positive sentiment in July was reported to reflect the renewed uncertainty surrounding economic recovery in global markets and the implications for client spending on services," NCB's report noted.
In employment the overall index was 48.1, down from 51.3 in June. NCB noted the main factor behind the fall off in employment was a shortage of suitably skilled staff.
