Rate of contraction here slows as EU has modest growth
WAGES continued to fall in the vital services sector last month, the latest survey shows, but the decline in activity was significantly less than in January.
The Purchasing Managers Index from NCB Stockbrokers rebounded to 48.8 from 44.4 the previous month. At less than 50, it is still signalling contraction, but at a modest rate.
The sector categorised as transport, media and travel returned to growth last month. Three of the four sectors were seen as growing, but the industry as a whole has been dragged down by the very steep fall in business services. Nevertheless, the rate of decline was the lowest for three months.
New orders fell for the sixth month in a row, despite an increase in new export orders.
"The domestic economy continues to drag, while the international economy is helping Ireland tread water," said Brian Devine, chief economist at NCB.
The better international situation was seen in strong growth in UK services.
The index for the euro area fell from 52.5 to 51.8. That represented modest growth, but Germany, France and Italy were the only member countries to show an increase in services output. Between them, they account for more than half the euro economy.
Falls in wages were the main reason for another stop in input costs in the services sector -- the 14th monthly fall in a row.
"It was also evident that price reductions are being passed on to consumers, with output prices falling at the fastest pace in three months.
"Anecdotal evidence also suggested that intense competition was leading to lower prices," Mr Devine said.
The construction sector was mentioned as a particular source of weakness.
Companies in the financial-intermediation sector, such as insurance, indicated that obtaining financing from banks remained difficult.
The jobs outlook remains bleak, despite improved optimism among firms. Staffing levels have now fallen for two years and the rate of job cuts was the steepest in three months.
Managers surveyed indicated that job losses were achieved by a combination of redundancies and the non-replacement of leavers. Close to 24pc of responding firms cut jobs over the month, against less than 7pc that were net hirers.
The steepest decline registered in the transport and leisure category. After being unchanged in January, employment at financial services fell sharply in February.
The increase in new export business was driven by the financial services and the transport and leisure sectors. The increase in new orders from overseas at financial firms followed a marked decline in the previous month.
The rise in new export business in the transport and leisure category followed 16 successive declines and was a vast improvement on the severe contraction registered in February 2009, NCB said.