Ireland's services sector cut prices at a record pace in January in a vain attempt to boost demand during recession and as input costs fell sharply.
Lower energy costs and a drop in labour costs due to record job losses triggered the first instance of falling input costs in the history of the NCB Purchasing Managers' Index survey of services companies, from banks to haulage firms.
Reacting to the fall and weak consumer appetite, companies cut their prices at the fastest pace since the index started in May 2000 with 35 per cent of panellists signalling lower charges during January. The prices charged index fell to 35 from 38.7 in December.
But the price cuts failed to boost business and at 33.9, the headline gauge of activity suffered the second-fastest contraction on record, with only the November reading coming in worse.
Jobs were cut at a record pace in January with around 40 per cent of respondents indicating reduced staffing levels.
“January data signalled another considerable fall in activity at Irish service providers," said Brian Devine, economist at NCB Stockbrokers.
“With little to stop the pace of job losses continuing, the standardised unemployment rate which currently stands at 8.3 per cent will breach 10 per cent in the first half of 2009,” Mr Devine said.
Ireland was the first euro zone economy to fall into recession last year and job cuts have dominated the headlines this year with Dell, the world's second largest PC maker, announcing 1,900 layoffs in January.
With Ireland's economic output forecast to contract 4 per cent this year, the worst recession on record, Irish service providers are pessimistic about the future.
But economists in a recent Reuters poll say falling prices could boost disposable income and help drive competitiveness during the downturn.
Reuters