Services sector growth hits four-month low in March

Growth in the Irish services sector hit a four-month low in March, new data showed, as businesses were hit by disruption caused by the heavy snow at the start of the month.

The Investec Services Purchasing Managers Index report recorded a headline figure of 56.5, versus 57.2 for February. A reading above 50 indicates expansion in the sector, while below 50 represents a contraction.

The rate of growth in new business was little changed, driven by overseas customers as the pace of expansion in new export orders reached its fastest in 2018. That led to a sharp increase in backlogs of work, extending to 58 months the measure’s run of growth. Employment also rose again, although at the weakest rate since May 2013, easing for the third month in a row.

The rate of growth in input costs moderated during March, hitting a six-month low, but higher raw materials prices and increased wages meant they were still pronounced. That led to a rise in output costs, but despite profitability still slipped to a four-month low in March.

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“The forward-looking confidence index slipped to a four month low last month, although we would caution against reading too much into this given that it may have been influenced by the since-departed weather issues,” Investec’s Philip O’Sullivan said. “We are nonetheless pleased to see the breadth of optimism across the sector.”

All four of the segments captured by the index - telecoms, media and technology, financial services, business services, and transport and leisure - posted readings above 50 for the 70th successive month in March.

Investec said that taken with the Investec Manufacturing PMI report from earlier in the week, the narrative appears to be one of a slight moderation in growth across much of the private sector in the first quarter.

“However, given the favourable economic backdrop we would expect to see a pick-up in activity as the year progresses,” Mr O’Sullivan said.