Services firms cut jobs and prices at record pace

IRISH SERVICES firms cut jobs and prices at a record pace last month as they struggled with the global economic downturn and the collapse in domestic property construction.

The NCB Irish Purchasing Managers' Index edged up to 40.8 in September from August's record low of 39.8, but remained in contraction well below the 50 mark indicating growth, for the eighth month running.

"The contraction in services sector activity is weighing on employment which in turn is weighing further on consumer spending," said NCB Stockbrokers chief economist Brian Devine.

He said financial and business services firms were suffering due to the intensifying credit crisis.

Employment levels in services fell last month as companies cut jobs at the sharpest pace since the survey began in May 2000. The employment index fell to 41.5 in September from 42.2 in August.

Fees charged by the service sector fell at the fastest rate in the survey's history as companies competed for new business, the index, complied by Markit, found.

This saw the prices charged gauge fall to 46.4 in September from 49.4 in August, suggesting a drop in demand is making it impossible for companies to pass on higher raw materials costs.

The index, measuring business expectations at 55.1, was at its lowest since July, marking September as the second weakest month in the survey's history.

"Around one-quarter of firms expect activity to fall, with the economic slowdown in some cases forecast to continue for up to two years," the report found. Despite the measure of new business edging up to 39.5 from August's record low of 38.3, it remains very weak, with those surveyed noting the lack of available credit as being a cause of contraction, with a consequent reduction in investment spending reduced.

Separate data released yesterday showed services activity across the euro zone at near five-year lows last month, while business confidence hit its lowest in at least a decade, increasing the likelihood that the 15-member bloc is in recession.

The survey showed contraction in the euro zone's dominant services sector for the fourth month running, and further contraction in new business, pointing to growth sliding further in coming months. However, the data showed price pressures are beginning to ease.

- (Additional reporting Reuters)