Saturday 1 October 2016

Services sector slowed in July

Published 05/08/2016 | 02:30

Investec Ireland chief economist Philip O’Sullivan
Investec Ireland chief economist Philip O’Sullivan

Growth in the Irish services industry slowed in July in the latest sign that fallout from the UK's Brexit vote has taken a toll on economic sectors.

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According to the Investec Purchasing Managers' Index (PMI), the services industry fell to its lowest rate of growth since February 2014.

However, the PMI still indicates a very robust pace of expansion.

The sector covers everything from hotels to banking.

It follows evidence earlier the week of a slow down in manufacturing sector.

The services PMI points to a slight weakening in new business orders, the second in as many months.

However, the index points out that twice as many of those surveyed reported a rise in new business as those that posted a fall.

The headline reading for the PMI came in a 59.5 for July, down from June's 61.2, extending the four-year run of readings which are above the 50 mark.

A PMI reading above 50 indicates growth, and even the lower July figure is well ahead of the European average.

In July, companies in the sector continued to add staff, however employment is growing at its weakest rate since May 2013.

Average input costs rose at a sharp pace in July, but managers remain optimistic about the year ahead.

Investec chief economist Philip O'Sullivan expressed surprise at the outlook of Irish businesses.

"Given the backdrop of Brexit, it is surprising that the 'Business Activity: Expected Levels in 12 Months' Time' (expectations) index recovered some ground in July from June's 34-month low.

"With that being said, within this index we note that the only monitored segment within the four (telecoms, media and technology, business services, financial services and travel & leisure) that comprise the services sector to have seen an improvement in sentiment was TMT, with the others all reporting a less optimistic outlook than in the run up to the referendum," Mr O'Sullivan said.

Business confidence ticked up slightly in July with the optimism reflecting expected improvements in wider economic conditions and business expansion plans.

In the three months to July profitability saw a solid increase in the sector with the rate of expansion seen slightly above the last quarter.

Irish Independent

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