IRELAND’S SERVICES sector shrank in July at the slowest rate for 14 months, a slight improvement from June, with companies optimistic about prospects for a third successive month.
The NCB Purchasing Managers’ Index rose to 42.4 in July from 42.3, the highest mark since May 2008, with the gauge of business expectations slightly down at 53.9 from June’s nine-month high of 54.8 but still well above the 50 mark which separates growth from contraction.
“According to respondents, optimism was largely due to a hope that the Irish economy will begin to recover next year, with the current economic situation proving to be the nadir for activity,” said Brian Devine, economist at NCB Stockbrokers.
The July data signalled an 18th consecutive monthly fall in activity at Irish service providers, with the steepest reduction in the transport and leisure sector.The PMI survey’s employment component indicated the 17th successive month when firms shed jobs.
The fall in employment largely reflected further adjustments to lower activity requirements, while there were also reports that jobs had been cut in an attempt to reduce costs, said Markit, which compiles the data.
Lower salary payments were a key factor behind the latest fall in input costs, it added, with input prices declining at the second-fastest pace in the series history in July.
Services data for Europe released yesterday confirmed that the euro zone is edging back towards economic growth as a slowdown in new business taken on by firms continues to abate. Yet any recovery could be slow as the number of unemployed soars and consumers remain reluctant to spend, according to Markit’s Eurozone Services Purchasing Managers’ Index.
The index of about 2,000 companies ranging from cafes to banks rose to 45.7 in July from 44.7 in June, its highest level since last October. That was slightly up on the flash estimate of 45.6, helped by a marginal revision upwards in new business.
Earlier data showed Germany’s services sector leapt close to recovery levels in July, while an improvement was also seen in Italy. France, the euro zone’s second largest economy, went against the trend and saw its services recession deepen, as did Spain, by far the weakest of the top four euro zone countries.
The data adds to growing evidence that the euro zone economy is creeping out of recession, but will require a delicate touch by the European Central Bank, which is widely expected to leave rates at a record low of 1.0 per cent for some time. – (Additional reporting Reuters)
