Apr 24, 2009 - 5:31:05 PM
|Source: Markit Economics
The Irish service sector reported a further sharp fall in business activity in December. The global economic downturn coupled with the ongoing credit crunch contributed to the decline. Around 45% of panellists signalled lower activity, against less than 14% that reported a rise.
The NCB Republic of Ireland Services PMI (Purchasing Managers’ Index) is produced by Markit Economics. The monthly report features original survey data collected from a representative panel of around 300 companies based in the Republic of Ireland services sector.
Pessimism was recorded for the third month in succession as many respondents forecast the economic downturn to intensify during 2009. Exactly 37% of panellists expected activity to be lower in twelve months’ time, compared with below 28% that predicted a rise.
Uncertainty among clients led them to postpone decisions on new projects in December. This was part of the reason for the latest considerable decrease in new business levels, which have now fallen in each month since February. New business from overseas also contracted sharply, at a rate second only to October’s series record in its severity. The strength of the euro relative to sterling made new business from the UK harder to attain.
Outstanding business levels declined at a new survey-record rate in December. Over 45% of panellists highlighted less work-in-hand over the month, compared with just over 11% that noted a rise.
For the seventh month in succession, staffing levels in the Irish service sector fell at the fastest pace in the series history. Employment reductions have now been recorded in each of the past ten months.
Panellists reported that jobs had been cut and freezes on hiring brought in as companies adapted to lower activity requirements.
Input prices rose only marginally for the second consecutive month. The latest easing of input cost inflation was largely due to falls in the global price of oil. There were also reports that the relative weakness of sterling had led to reductions in the cost of some inputs from the UK.
Around 28% of panellists indicated lower output charges in December, as competition for orders intensified. Just 5% raised output prices over the month. The rate of deflation was substantial, only slightly slower than November’s series record.
Commenting on the NCB Republic of Ireland Services PMI survey data, Brian Devine, economist at NCB Stockbrokers said: “Each of the four broad sectors (Business, Financial, TMT and Travel & Tourism) monitored by the survey recorded falling activity in December, although the rates of decline varied markedly. The steepest contraction was registered among Travel, Tourism & Leisure service providers reflecting both the strong euro and weak domestic demand. TMT activity declined at a much slower rate than the other sectors, registering only a slight reduction.
The relative strength of the TMT sector is consistent with anecdotal evidence from recruitment agents which suggests that employment in IT has suffered the least in the current downturn.”