Irish service providers record weakest activity growth in a year

PMI figures also show growth in activity among Spain and Italy’s service industries

Contrary to the weaker expansion in business activity, new order growth among service providers quickened.

Growth in business activity among Irish service providers slowed in December for the third consecutive month and was the weakest since November 2017, according to a survey.

However, the latest IHS Markit Ireland Services PMI also shows the rate of expansion in new orders ticked up and was sharp.

Cost inflation quickened to the fastest in four months, driven by rises in fuel, utility and insurance bills and higher staff costs. In contrast, the rate of charge inflation softened.

The headline seasonally adjusted Business Activity Index posted 56.3 in December, down from 57.1 in November. A score above 50 represents growth whereas a score below 50 represents contraction.


The survey also showed that activity growth among Irish service providers remained solid and was faster than the series average.

At the sector level, technology, media and telecoms (TMT) companies registered the fastest rise in business activity.

New order growth quickened in December as service providers said they had seen greater customer interest in their services.

TMT companies posted the sharpest rise of all monitored sectors. New export business also expanded at a faster pace in December as firms saw an overall pick-up of international demand, especially from the UK.

On the employment front, service providers continued to create jobs at a sharp rate. The latest rise in employment was at the same pace as that seen in November. All four sectors saw staffing levels increase, led by TMT.

The level of outstanding business increased further, but the rate of backlog accumulation weakened to its slowest in 27 months as the sharp increase in headcounts enabled firms to make some headway through their work-in-hand.

Elsewhere, Italy’s services sector expanded at its fastest pace in three months in December, signalling a possible acceleration in growth during the first part of 2019.

Its score rose to 50.5 from 50.3 in November. In the third quarter Italy’s economy, the euro zone’s third largest, shrank for the first time in four years.

In Germany, a drop in both new orders and business confidence slowed growth in the services sector to a 27-month low in December, adding to signs that Europe’s largest economy is cooling.

Markit’s final services index fell to 51.8 from 53.3 in November, also lower than a flash reading of 52.5.

Meanwhile, in France, services activity fell more than previously thought last month, retreating at the fastest pace in more than four years during a period of violent anti-government protests.

Its score plunged to 49 from 55.1 in November, worse than a preliminary reading of 49.6.

France has witnessed some of the worst street violence in decades during grassroots protests that initially targeted fuel hikes in mid-November, causing some business to board up windows during the peak pre-Christmas holiday season.

In Spain, service providers maintained buoyant growth in December as new orders kept flowing in to a sector accounting for around half the country’s economic output.

Its score of 54 was the same as in November and October and a whisker above the 53.9 forecast by eight analysts polled by Reuters.

Gains on the index suggest economic growth will continue into 2019 although downside risks persist, IHS Markit economics director Paul Smith said.

Companies from bars to banks reported sustained demand, keeping the sub-index for new business in expansion territory at 54.6, although this represented a dip from 55.4 in November.

Most orders came from within Spain, while business from abroad fell for the fifth month in a row. Some companies surveyed said anti-government protests reduced demand from neighbouring France in late 2018. – Additional reporting: Agencies

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter