Irish services sector grows but activity in euro zone declines
IRELAND’S SERVICES sector returned to growth last month but a euro area-wide slump in business activity revived fears the EU is sliding back into recession.
A sharp downturn among Italian and Spanish businesses dragged the euro zone’s private sector back into decline last month.
Germany, the region’s strongest economy, continued to expand, but at a slower pace, while economic activity in France stalled, although the outlook for the coming months improved.
Markit’s Eurozone Composite PMI, which gauges the activity of manufacturing and services companies, slipped to 49.3 in February, revised down from a preliminary reading of 49.7 and below January’s reading of 50.4.
A reading below 50 denotes a contraction in activity, meaning Europe’s private sector has been stuck in a modest decline for five of the last six months.
In contrast, the latest NCB Stockbrokers’ Purchasing Managers Index (PMI) indicated activity in Ireland’s services sector rose at its fastest pace since February last year.
The index, which is derived from a questionnaire sent to a panel of 600 companies in the services sector, rose to 53.3 last month from 48.3 in January.
Service providers, ranging from hotels and hairdressers to IT firms and telecoms, have been among the worst hit in the recession.
The NCB’s sub-index measuring new business rose for the first time in three months on what it said were signs that clients were more able to commit to new projects.
The survey suggested business sentiment also improved last month, with the level of optimism now at its highest level for 12 months.
However, staffing levels at Irish firms continued to fall during February, with respondents noting both redundancies and resignations.
Employment has decreased for 10 successive months, the survey showed, but February’s fall represented the slowest rate of decline since November.
The sub-index for input costs rose again last month due to higher fuel costs while export orders gained further momentum, growing at their fastest pace in a year.
“This is a welcome development given the weak house price and retail sales data in January,” said Brian Devine, economist at NCB Stockbrokers.
“Ultimately, employment growth will be required for there to be a meaningful recovery in the Irish economy and to date this is still elusive,” he added.