Business activity in Dublin's private sector decreased in the final quarter of 2020, according to the latest purchasing manager's index from IHS Markit, produced for Dublin City Council.

Following a slight increase in the third quarter, the latest Dublin PMI shows that output continued to rise in the manufacturing and construction sectors in the fourth quarter, however increased Covid-19 restrictions in October and November brought parts of the services sector to a standstill.

The overall decrease to 49.2 was softened by the relaxation of restrictions in December. 

Employment contracted for the third consecutive quarter - and although remaining modest, the pace of job cuts was quicker than that seen in the third quarter.

The rest of Ireland posted a stabilisation of workforce numbers, with Dublin’s relative underperformance relecting the dominence of the service industry in the capital.

Looking forward, Dublin companies continued to record falling new orders during the final quarter.

While this is the fourth quarter in a row in which new business has decreased, the rate has moderated.

Having risen in the third quarter, the rest of Ireland also saw a drop in new orders in the final quarter, although it was modest.

The tightening of restrictions in response to the third wave of Covid-19, which has also shuttered construction, has meant a bleak start to 2021 for Dubliln businesses.

The outlook remains at the mercy of the intensity of the virus transmission and the speed of the vaccine roll-out.

Commenting on the PMI, Andrew Harker, Economics Director at IHS Markit said the particular impact of the pandemic on service providers was behind the overall decline, and the relative importance of services to the Dublin economy meant that the capital underperformed relative to the Rest of Ireland over the course of the quarter.

"With Covid-19 cases rising sharply again in January, the first quarter looks set to be another extremely challenging time for local firms," said Mr Harker.