Service sector declines while retail up slightly

GROWTH IN the services sector in Ireland and in the wider euro zone remained weak last month, while retail sales rose slightly.

The NCB Purchasing Managers’ Index dropped to 51.1 from 51.7 in July – with the 50 mark separating growth from contraction.

Exports were once again the main driving force behind the expansion in activity in August with new export business up from 49.6 to 50.4 on the back of increased demand from the Middle East, Britain and the US. The new orders index contracted for the fourth month in succession, falling to 47.9 from 49.2.

“The familiar two-tiered story is evident again as domestic demand caused new business orders generally to decline despite the rise in export orders,” said NCB chief economist Brian Devine.

The fastest decline in activity was recorded in the financial services sector, where activity fell for the third month in a row. Business activity at technology, media and telecoms service providers also contracted markedly last month and at a sharper pace than in July.

The data indicate that service providers remain optimistic regarding the prospects for activity growth. The level of positive sentiment weakened and was at its lowest since November 2010 when Ireland received the €85 billion bailout from the EU and IMF.

Outstanding business decreased again in August, although the rate of decline in backlogs moderated slightly since July, it remained marked. Employment levels at service providers fell again as it has done for every month bar April since March 2008. But NCB said the rate of job shredding was “modest” and broadly in line with those recorded in the previous three months.

Higher fuel and energy costs led to a rise in input prices for the ninth consecutive month. Output costs fell for the 37th month in a row. The rate of decline remained “substantial” but was slightly slower than that seen in the previous month.

Growth in the euro zone’s dominant service sector eased for the fifth consecutive month in August, expanding at its weakest pace in two years, as new orders in the private sector shrank for the first time since August 2009.

Markit’s Eurozone Services Purchasing Managers’ Index (PMI) nudged down to 51.5 last month from 51.6 in July, its lowest reading since September 2009 but in line with an earlier flash reading.

Activity in Britain’s dominant services sector slowed at the fastest pace in more than a decade last month, and firms’ confidence in future business weakened to a one-year low, adding to evidence of a stalling economic recovery.

The Markit/CIPS services purchasing managers’ index (PMI) fell to 51.1 in August from 55.4 in July. This was the second biggest fall on record.

Meanwhile, retail sales rose 0.2 per cent in both the euro zone and the European Union as a whole in July, according to new figures from Eurostat.

In June, retail trade had risen by 0.7 per cent and 0.5 per cent respectively.