THE RATE of contraction in the Irish services sector accelerated in November, the latest NCB Purchasing Managers’ Index (PMI) shows, as fragile domestic demand was further weakened by the recent floods.
The index dropped to 46.8 in November from 47.4 the previous month, falling further from the 50 mark that separates growth from contraction, and reflecting what the report described as “the weakness of the wider Irish economy”.
Activity in the sector, which has fallen for 22 consecutive months, had shown signs of stabilising in October with the rate of contraction slowing and the amount of new business reported by companies nearing growth territory.
November’s PMI indicated the sharpest reduction in activity over the month was in the transport leisure category. New business orders in the technology, media and telecoms division registered a slight rise.
Despite the fall in activity, the report noted, service companies remained optimistic that activity will pick up over the next 12 months.
“Respondents predict that wider economic conditions will improve, with demand increasing from abroad,” it said
The report noted that the contraction in new orders was registered despite the second successive monthly rise in new business from abroad as international demand showed signs of strengthening.
Earlier this week, the PMI index for manufacturing in November rose as growth in output and new orders halted a 20-month contraction period.
“The services PMI is more directly correlated with domestic demand than manufacturing output,” said Brian Devine, economist at NCB Stockbrokers. “It is not surprising that the services PMI has lagged behind the manufacturing PMI, which saw output expand in November, but domestic demand has been dealt a further blow by the flooding that has besieged certain areas.”
The rate of job cuts in the sector quickened in November, reflecting adjustments to lower workloads.
Some 28 per cent of respondents signalled lower employment levels during the month. Employment has fallen continuously since March 2008.
The euro zone’s service and manufacturing industries expanded at the fastest pace in two years in November, London-based Markit Economics reported.
The EU’s statistics agency also confirmed its earlier estimate that the combined economy of the 16 states using the euro expanded 0.4 per cent in the third quarter, officially exiting recession after five quarters of falling output.
The US services sector unexpectedly contracted in November, with an index measuring activity falling to its lowest level since July, data from the Institute for Supply Management showed.
Britain’s service sector grew in November but more slowly than expected, following weak money supply data and a big drop in the manufacturing PMI index earlier in the week.
