Services sector grows in July for first time since lockdown

Activity in the services sector grew in July for the first time since the economy entered lockdown restrictions earlier this year, according to data from AIB.

The July purchasing managers index (PMI) witnessed a modest expansion but the volumes of income new sales fell further, while employment continued to decline.

The business activity index rose to 51.9 in July from 39.7 the previous month. Any reading above 50 indicates a sector in expansion.

"While this is a very welcome development it is still a relatively low reading for the Irish services PMI – the index stood at 59.9 as recently as February, indicating that the sector is still far from being back to normal," said AIB chief economist Oliver Mangan.

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Mr Mangan noted that the July reading in the Republic lagged elsewhere in Europe, reflecting "the much more cautious approach of the Irish authorities to lifting lockdown restrictions compared to elsewhere, where businesses have been reopened for a longer time".

Three out of the four sub-sectors registered growth of total activity in July with the transport, tourism and leisure sector witnessing the strongest expansion. The technology, media and telecoms sector recorded a decline in activity in July, having been the only sector to post an increase in June.

New business declined for the fifth month running, albeit at the slowest rate over that period. And as demand continued to weaken, service providers cut workforces for the fifth month running in July. The financial services sector had the strongest decline in jobs.

“The 12-month outlook for the services sector remained positive, although it failed to add to the strong rise recorded in June. Overall, the July services report shows activity is picking up momentum, but at a cautious pace,” said Mr Mangan.

The AIB Ireland services PMI is compiled by IHS Markit from responses to questionnaires sent to a panel of about 400 service sector companies.