Business confidence in services sector falls to 6½-year low

AIB ’s latest index says economy still growing at a faster rate than US and euro zone

Firms in the technology, media and telecoms sector posted the fastest rise in business activity of the four monitored categories. Photograph: iStock

Firms in the technology, media and telecoms sector posted the fastest rise in business activity of the four monitored categories. Photograph: iStock

 

Confidence among businesses in Ireland’s services sector is at its lowest level in 6½ years. And export orders are growing at their slowest rate in 28 months, according to an industry survey.

However, employment is rising strongly.

AIB ’s latest Purchasing Managers’ Index (PMI) for the sector, which covers a diverse range of business activities, from communications and financial services to tourism and hospitality, suggests rates of activity and new order growth eased in March.

The headline business activity index still posted a figure of 55.3, comfortably ahead of the 50 mark that signals expansion. And the Irish services sector continues to expand faster than those in the United States or for the euro zone as a whole.

Firms in the technology, media and telecoms sector posted the fastest rise in business activity of the four monitored categories, mainly on foot of a rise in new orders.

Central to the rise in business activity was an increase in new orders, though it was slightly weaker than in February. The survey found that companies in the transport and leisure sector posted the steepest rise in new orders among the monitored categories.

Job creation

The rate of job creation was marked, the survey found, and quickened from February. Service providers said they added staff in order to fulfil customer demand. Solid employment growth was recorded across each sector, led by technology, media and telecoms businesses.

“Irish service providers continued to experience strong growth in new business in March, although new export orders expanded at their weakest rate in 28 months, possibly reflecting the impact of slower global growth this year,” said Oliver Mangan, AIB’s chief economist.

“Nonetheless, volumes of unfilled orders rose further, while employment continued to expand at a strong pace,” he said.

He said Brexit uncertainty was weighing on sentiment, with business confidence, while still high, declining to its lowest level in more than 6½ years.

“Overall, the AIB Services PMI reading of 55.3 for March suggests that the Irish economy is continuing to expand at an impressive pace. However, the readings for the opening three months of the year are all below the levels seen in 2018. This indicates that growth in the economy has slowed somewhat from the very robust rate seen in recent years,” Mr Mangan said.

The AIB Ireland Services PMI is compiled by IHS Markit from responses to questionnaires sent to a panel of about 400 service sector companies.