Services sector returns to growth

Business activity in the Irish services sector returned to growth last month after falling in September.

The latest NCB Services Purchasing Managers Index (PMI) rose from 48.8 to 50.9, with the 50 mark separating growth from contraction.

The new business orders index stayed below the 50 mark, however it increase from 49.3 in October from 47.8 in September.

"New business from abroad expanded for the fourteenth month in a row. This was, however, insufficient to offset the weakness in domestic new orders," said Brian Devine, economist at NCB Stockbrokers.

"The prospects for domestic demand remain clouded. The focus must remain on correcting the fiscal situation and maintaining international credibility so Ireland can benefit from its advantages in the export sector," he added.

New business from abroad rose for the 14th consecutive month in October, while input costs continued to fall for the 22nd month in a row.

The index shows that jobs were cut again last month as services providers reacted to declining workloads.

Moreover, although service providers continue to predict a return to increased activity over the next year, optimism declined in October.

Meanwhile, growth in the eurozone's service sector lost steam last month as a slowdown in smaller economies and a downturn in Spain outweighed an upswing in activity in Germany, key private sector business surveys showed today.

The Markit Eurozone Services Purchasing Managers' Index (PMI), which monitors the performance of thousands of companies ranging from banks to hotels, fell in October to an eight-month low of 53.3 from 54.1 in September.

While that was revised up slightly from a flash estimate of 53.2 and still well above the 50 mark that divides growth and contraction, the survey showed activity was likely supported by a reduction in backlogs of work.

The euro zone composite PMI slipped to an eight-month low in October of 53.8 from 54.1 in September.

The flash reading was slightly lower, at 53.4.

Survey compiler Markit said the composite PMI data suggested quarterly euro zone economic growth of 0.3 per cent, down from 0.6 per cent in the third quarter and a peak of 1 per cent in the second quarter.

The report showed, however, that a significant contributor to growth in the past month came from working down existing orders rather than meeting new ones.

The service sector backlog of work index fell below 50 for the first time since the start of the year, down to 48.8 last month from 51.6 in September.

"The fact that this growth was partly achieved through backlogs of orders falling for the first time in nine months suggests that firms are struggling to maintain activity levels in the face of weakened inflows of new orders," said Chris Williamson at Markit.

"If this continues, firms are likely to consider job cuts, meaning employment in the sector could soon start falling again."

The composite employment index fell further last month, slipping to 51.1 from September's 51.4, indicating firms were taking on new workers at the slowest pace since June.

Additional reporting: Reuters