ACTIVITY AND employment levels in Ireland's services sector hit record lows in August, as deteriorating economic conditions led to a fall-off in new business.
The services sector contracted across Europe, although Germany bucked the recent trend by continuing to show modest growth.
According to the NCB Services Purchasing Managers' Index (PMI), the seasonally adjusted Business Activity Index registered an eight-year low in August of 39.8, as activity levels fell due to deteriorating economic conditions, linked in turn to the credit crunch and construction sector weakness.
The index has been falling since February.
A figure above 50 indicates growth. Anything below that signifies contraction.
In three of the four monitored service sectors, record falls in activity levels were registered, with firms in the transport leisure sector performing worst.
Financial services firms also registered a record reduction in activity, while activity at technology, media and telecoms companies contracted at the sharpest pace since May 2003.
New business declined at the sharpest pace in the survey's history, while weaker external demand and the strength of the euro hit efforts to win new exports, while new foreign business levels also declined, albeit at a moderate pace.
Staffing levels contracted at the sharpest rate in the survey's 10-year history in August, matching the experience of the manufacturing sector, which reported earlier this week - with almost a quarter of firms indicating that employee numbers had fallen since July, either as a result of redundancies or non-replacement of departing staff.
For the first time in nearly five years, employment contracted in all four broad service categories, while staffing levels in the business services and transport leisure sectors fell at record rates.
While service providers continued to face rising input costs as energy and utility bills increased, the rate of inflation slowed markedly from July's 86-month high and was the weakest since February. Prices charged by Irish service providers fell for the second time in three months.
Despite the fall-off in new business, confidence improved in August, rising to 56.7 from 52.8 in July. This remains low by historical standards, however.
Service sectors across the euro zone also shrank in August, although the Markit Eurozone Services Purchasing Managers Index came off the five-year low it hit in July to rise slightly to 48.5, up from 48.3. Among the big four euro-zone economies Germany was the only one to remain in positive territory.
Employment levels also took a hit across Europe, declining to 48.9, the lowest level since February 2004.
