Services sector begins to show fall in activity

The Republic's services sector began to reflect the global economic slowdown in August, according to a monthly survey published yesterday.

The NCB Purchasing Managers' Services Index recorded a fall in the overall level of business activity in the services sector for August, registering a reading below 50 for the first time since April of this year, when food-and-mouth fear was at its height.

In broad terms, a reading of above 50 on the index translates as growth, while readings below 50 indicate contraction. The technology, media and telecoms (TMT) sector recorded the sharpest decline in activity of the four sectors analysed, registering 36.7 and continuing on a steady downward trend which started in June. Financial services and the sector taking in travel and tourism also fell.

While August's overall reading of 49.1 technically illustrates a general decline in services activity, however, NCB chief economist, Mr Dermot O'Brien, is reluctant to herald recession just yet.

"Qualitatively, the services sector has slowed down," he said yesterday. "And technically- speaking, the 50 level is supposed to be the cut-off between expansion and contraction. But I still find it difficult to believe." Taking the numbers as a whole, Mr O'Brien pointed to an overall increase in confidence.

Even in the beleaguered TMT sector, however, confidence still came in at a reasonably healthy 75.9.

The NCB index covers all private sector services in the Republic, apart from retail and wholesale business. Had this sector been included, Mr O'Brien said that the overall reading would have been higher.

He also acknowledged that a general holiday slowdown may have effected the August figures.