Activity in the services sector of the economy has fallen for the last six months in a row, the latest NCB Services PMI index shows today. This is the longest uninterrupted fall in activity in the eight year history of the survey.
The seasonally adjusted business activity index fell to a survey low of 41.4 in July, down from June's figure of 41.9. This is the third month in a row the index has fallen to a new low. It has been on a downward trend since the start of 2008. Any figure below 50 means activity fell.
Confidence among Irish service providers was badly hit last month, with the degree of optimism the weakest in the survey's history. The business expectations index posted a new survey low of 52.8, down from June's 59.3. Firms were worried that weakness in the construction sector would spread further into the wider economy and affect activity a year ahead.
Companies in the services industry also reported the sixth successive monthly decline in new business volumes in July - reflecting a deteriorating economic environment here. New business contracted sharply last month, with the rate of decline accelerating to a new survey record.
The survey showed that new export work continued to fall on the back of weakening demand in both Europe and the US.
Employment in the service sector also contracted at a record pace in July, with the employment index hitting a new low of 45.6. Increasing input costs, coupled with falling demand, led firms to reduce staffing levels in an efforts to make cost savings.
July also saw input prices increasing at the fastest pace since May 2001, on the back of surging oil and fuel costs. Higher food and transportation costs were also cited by services firms.
'Rising input costs in conjunction with weak demand is putting significant pressure on firms in the services sector,' commented Eunan King, chief economist at NCB Stockbrokers.
'Business activity in the services sector is at its weakest reading since the survey began. Unsurprisingly given this background, employment is contracting as firms seek to make cost savings,' he added.
