Job creation in services sector slows to lowest level in a year

AIB Ireland Services PMI figures for February also show growth of activity in the sector

Financial services companies posted the fastest rise in business activity, but also posted a decline in foreign demand.

Financial services companies posted the fastest rise in business activity, but also posted a decline in foreign demand.

 

Job creation in the Irish services sector slowed to its lowest level in almost a year last month, according to the latest AIB Ireland Services PMI figures.

However, the figures show that activity accelerated during February amid a pick-up in new order expansion.

The headline seasonally adjusted figure was 55.9, up from 54.2 at the start of 2019 and signalled a marked rise in business activity. The 50 mark separates expansion from contraction.

Sentiment among Irish service providers for the year to come weakened to its lowest level since May 2013. Some panellists said Brexit was affecting their customer base.

Financial services companies posted the fastest rise in business activity, but also posted a fourth consecutive decline in foreign demand. Transport and leisure companies posted the fastest increase in overall new business.

New business from abroad also rose, though at the slowest pace in the current 27-month sequence of expansion. Companies in the technology, media and telecoms (TMT) category were the front runners in terms of export sales growth.

However, employment growth in the services sector eased for the second consecutive month in February, posting the slowest increase in staffing levels since March 2018.

Curbed

Anecdotal evidence from those polled indicated that payroll expansion was curbed by the non-replacement of exiting staff. Companies operating in the TMT sector posted the strongest expansion in staffing levels.

AIB chief economist Oliver Mangan said that while the overall figures indicated the economy would perform strongly in 2019, it is unlikely to maintain the robust rate of growth seen in recent years.

“Although still below the levels seen last year, the February reading is consistent with strong growth in business activity in the services sector,” he said.

“The pick-up in the Irish index was accompanied by a marked rise in new business, with companies reporting an increase in new domestic orders, as well as stronger demand from the UK.

Backlog

“The strengthening in activity saw a rise in the backlog of orders, suggesting that there may be capacity pressures emerging in the sector. There are also signs of increasing inflationary pressures, with rising input costs and output prices.

“Overall, the pick-up in the AIB Services PMI for February to 55.9 suggests that the Irish economy is continuing to expand at an impressive pace. However, the readings for the opening two months of the year are below the levels seen in 2018.”