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News : Irish Economy Last Updated: Aug 5, 2011 - 10:33 AM

Growth in Irish services activity slowed in July; New orders fell for a third month running
By Finfacts Team
Aug 4, 2011 - 7:12 AM

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Source: Markit

Growth in Irish services activity slowed in July as new orders fell for a third month running, according to a report issued Thursday morning.

The seasonally adjusted Business Activity Index – which is based on a single question asking respondents to report on the actual change in business activity at their companies compared to one month ago – pointed to an easing in the rate of expansion of activity in the Irish service sector, dipping to 51.7 in July, from 52.4 in June. Moreover, anecdotal evidence suggested that the rise in activity had been driven by the depletion of outstanding business, as new orders decreased.

An improvement in economic conditions over the coming year is expected to lead to an increase in activity levels, according to respondents. The level of optimism among Irish service providers improved in July, but remained weaker than the series average.

Fragile client confidence amid weak economic conditions in Ireland led to a third successive fall in new business in July, although the rate of contraction in overall new orders was only slight. New orders from abroad at Irish service providers also decreased over the month. The marginal reduction was the first in 2011 so far, and signalled a marked turnaround from the strong rises seen earlier in the year.

Largely reflecting falling new business, backlogs of work decreased again in July. Moreover, the rate of depletion accelerated over the month to the strongest since October 2010.

Irish services companies lowered employment for the third successive month in July. In fact, aside from a slight rise in April, staffing levels have decreased in each month since March 2008. Panellists attributed the latest fall in employment to declining workloads.

The rate of input price inflation eased further in July, and was only marginal. That said, input costs have now increased in each of the past eight months. Anecdotal evidence pointed to higher energy and fuel costs.

In spite of a further rise in input costs, intense competition for new business led service providers to lower their output prices again in July. The rate of decline was substantial, and the steepest since September 2010.

Commenting on the NCB Republic of Ireland Services PMI (Purchasing Managers' Index) survey data, Brian Devine, economist at NCB Stockbrokers said:
“The services sector expanded once again in July, although the index was weaker than in July (51.7 from 52.4). Both new business generally (49.2) and new export business (49.6) contracted in July, with fragile confidence causing clients to delay purchasing decisions. The EU debt problems, US debt issues and US growth issues are destabilising not only to the markets but to general business confidence.”

The NCB Republic of Ireland Services PMI (Purchasing Managers’ Index) is produced by Markit Economics. The report features original survey data collected from a representative panel of around 300 companies based in the Republic of Ireland services sector.

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