Ireland's services sector shrank for the first time in almost five years last month as new business contracted both at home and abroad, the NCB/NTC Purchasing Managers' Index survey showed this morning.
The headline business activity index fell to 48.3 in February from 51.9 the month before and dropped below the 50.0 mark that separates growth from contraction for the first time since May 2003.
The index has fallen from levels around 65 in mid-2006 as the end of a Irish housing boom combines with a sharp slowdown in the US economy to undermine demand for services.
"There were some reports that clients had transferred work to lower cost overseas rivals," said NTC Economics, which compiles the survey of about 600 Irish companies.
The survey has registered just three other brief downturns since its inception in May 2000.
"While the overall report is not upbeat, we have seen dips below the 50 level in 2001 and 2003 which did not translate into a general economic slowdown," said Eunan King, senior economist at NCB Stockbrokers.
"We need to see how the next few months pan out," he added.
The new business index showed contraction in February for the first time since May 2003, falling to 48.1 from 50.4 in January; backlogs of work fell for the sixth month running; and new export business shrank for a second month, albeit less sharply than in January.
Competition for business intensified and the gauge of prices charged dropped to 49.8 from 50.1 in January, showing a slight overall cut in charges for the first time since June 2005.