The downturn in the Irish services sector intensified in October. The latest NCB Services PMI posted a reading of 36.1 last month, the lowest level since data were first collected in May 2000.

The index had stood at 40.8 in September. Any figure below 50 means activity fell.

Many companies surveyed said that activity had fallen as the economic slowdown led to a lack of new orders.

For the first time since the services survey started, Irish companies were pessimistic about the outlook for activity. They indicated that they expected to current slowdown to worsen next year.

The survey reveals that weakening confidence among clients was partly behind the latest fall in new order levels. The pace of contraction was the fastest in the survey's history. New business activity has now fallen in each of the past nine months.

New orders from overseas also declined at a record pace last month. Companies blamed the contraction on the current global slowdown.

The October survey noted that the pace of redundancies in service companies intensified and was the fastest since the survey began. Declining employment has been reported every month since March.

Despite the rate of input cost inflation falling to its weakest since February 2004, input prices still rose considerably last month. Firms said that suppliers had passed on higher costs, while the strength of the dollar against the euro led to a rise in overall input costs. The slight fall in the pace of increase was due to a fall in the price of oil worldwide.

'The fall in the services PMI reflects both a fall-off in domestic and international demand,' commented Brian Devine, an economist at NCB Stockbrokers.

'The new business component signifies that there is likely to be a further contraction in consumer and business expenditure which will weigh heavily on GDP and employment in late 2008 and early 2009,' he added.