Contraction in services sector, survey shows

THE PACE of growth accelerated in the dominant US services sector last month but slowed among Chinese and European firms, with the sectors in Ireland and Spain tipping back into contraction.

The Irish services sector contracted for the first time in six months, with September data showing the impact of the slowdown in the wider Irish economy.

A fall in new orders, particularly in the domestic market, led to a fall in the NCB services Purchasing Managers’ Index from 52.9 in August to 48.8 in September. The 50 mark separates expansion from contraction.

“Anecdotal evidence suggested that the fall in activity partly reflected a drop in new order levels amid a slowdown in the wider economy,” the report said. “There were also reports that outstanding business had been depleted in an attempt to support activity.”

New business fell as uncertainty led to delays in purchasing decisions, with the seasonally adjusted index at 48.8 for the month. However, new export orders rose in September, and the rate of growth remained solid. Business sentiment remained positive, but at 66.0 was the weakest since April.

Employment continued to fall in the sector, but the survey said the rate was “fractional” and was the weakest for more than two years.

Input prices were also down, with the index falling to 47.2 from 48.5 a month earlier, with falling wage costs a factor.

The Markit Eurozone Services Purchasing Managers’ Index (PMI), which monitors the performance of thousands of companies ranging from banks to hotels, fell in September to a six-month low of 54.1 from 55.9 in August as resilient performances in Germany and France were offset by declines in Ireland and Spain.

The survey showed a four-month jump in employment growth had come to an end. – (Additional reporting, Reuters)