Purchasing managers' survey shows services sector growth still slowing

Growth in the Republic's services sector continued to slow in June, with three quarters of services companies reporting either stalled or declining activity over the month, according to the latest NCB Purchasing Managers' Services Index.

The index shows that although the overall services sector continues to expand, just less than half of 600 services companies surveyed saw no growth in their business between May and June, while a quarter of companies reported a fall-off in activity.

The sharpest decrease came in the transport, travel, tourism and leisure sector, where the business activity index fell from 65 in May to 43.2 in June. A rate of 50 or above signals an increase in activity compared to the previous month.

NCB senior economist Mr Eunan King said the index illustrated "a temporary pause" in the rate of services-sector growth, but cautioned against taking it as evidence of a general slowdown in the area.

A number of survey responses had raised the possibility of a "World Cup effect" influencing the June numbers, Mr King said, adding that the results were not "alarming".

On a seasonally adjusted basis, the overall services index registered 53.8, down from the 56.3 noted for May but remaining indicative of an expansion in the area.

Positive signs were evident in levels of optimism within the sector, with almost two-thirds of survey respondents expecting to see a pick-up in business activity in 12 months' time.

Mr King said this sentiment, when coupled with encouraging data from the NCB Purchasing Managers' Index published on Monday, suggested that an acceleration in services-sector activity was likely in coming months.

"They must have some basis for still believing that activity is going to pick up," he said, acknowledging however that employment growth did not yet reflect this attitude.

"Employment hasn't responded because they are trying to work the existing labour force harder," he said."It's just a degree of caution."

On a seasonally adjusted basis, the employment index registered 51.3 in June, down slightly on May.

The survey also shows some evidence of sustained inflationary pressure on companies' costs, with average output prices among surveyed firms rising for the eighth consecutive month. Respondents cited increased energy bills and upward pressure on salaries as particular challenges.