Euro zone service sector activity falls at fastest pace

ACTIVITY IN the euro zone’s dominant service sector shrank at its fastest pace in 27 months in October as the ongoing debt crisis sapped new business and soured sentiment, survey data indicated yesterday.

Markit’s Purchasing Managers Index (PMI) for the euro area’s services sector fell sharply to 46.4 last month from 48.8 in September – its lowest reading since July 2009 and markedly lower than an earlier flash reading of 47.2. A reading below 50 signifies contraction.

It was the biggest downward revision since November 2008, during the post-Lehman crisis.

Service providers, ranging from hotels and hairdressers to IT firms and telecoms, have been among the worst hit in the recession.

However, Ireland and Germany were among the only euro zone economies not to report a fall in service sector activity last month.

NCB Stockbroker’s services PMI for Ireland showed the sector expanded at a modest pace in October – the 10th consecutive month of growth.

The index, which is derived from a questionnaire sent to a panel of 600 companies in the services sector, rose to 51.5 last month from 51.3 in September on the back of delayed projects being reactivated during the month.

However, new orders at Irish companies decreased for a sixth successive month, albeit at a slower rate. The sub-index measuring new export business recorded a slight increase in demand from abroad, but NCB said this was only “fractional” and the weakest in three months.

Staffing levels fell again in October, with companies reporting both redundancies and the non-replacement of leavers, according to NCB. Last month’s fall in employment was the 43rd in the past 44 months.

Separately, the Irish Exporters Association revised downward its forecast for export growth this year following an unexpectedly weak third quarter. In its quarterly review, the association forecast export growth of 5 per cent for 2011, down from the 7 per cent predicted at the beginning of the year. It said total export sales growth grew by only 1.7 per cent in the third quarter when compared to the same period last year.