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Harsh lockdown hits Irish services harder than in the UK and Europe

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A woman carries shopping bags across the Ha'penny Bridge in Dublin's city centre as Ireland remains in lockdown. Photo Brian Lawless/PA Wire

A woman carries shopping bags across the Ha'penny Bridge in Dublin's city centre as Ireland remains in lockdown. Photo Brian Lawless/PA Wire

A woman carries shopping bags across the Ha'penny Bridge in Dublin's city centre as Ireland remains in lockdown. Photo Brian Lawless/PA Wire

Output in the services sector fell again in February as much of the economy remained shut due to Level 5 restrictions.

Business activity and new work both continued to decline, albeit at a slower pace than in January, according to the latest Services Purchasing Managers Index (PMI) from AIB.

The services sector – which spans industries from bars and hotels to banking – is the biggest contributor to the country's economy.

The services business activity index, an indicator designed to provide a single-figure measure of the health of the services industry, registered 41.2 last month. Any reading over 50 is growth, while below 50 is contraction.

The Index rose from 36.2 in January, pointing to a slower decline.

Data from the index is suggested a much softer overall reduction in activity than that seen during the second quarter of last year during the first Covid-19 lockdown, however it is still the second worst performance since mid-2009.

Activity continued to be weighed down by a sharp reduction in the volume of incoming new business. This was linked by companies mainly tolockdown restrictions both domestically and in the UK in particular.

"The AIB Irish Services PMI remained at a weak level in February, which is hardly surprising with much of the sector still in lockdown,” said AIB chief economist Oliver Mangan.

“The Irish reading of 41.2 is well below the corresponding flash February PMI figures of 49.7 for the UK and 44.7 in the eurozone, pointing to a more extensive lockdown here,” he added.

The transport, tourism and leisure sector again fared worst, although the rate of contraction slowed since January.

Technology, media and telecoms posted the second fastest decline in output since last May. Financial services recorded no change in activity.

On the back of the slowdown service providers cut their workforces again in February. Employment in the sector has fallen every month since March last year, except for a brief increase last December, according to the PMI report.

Last month also saw increased pressure on firms’ costs.

A number of reasons were cited for this including UK customs charges, fuel, insurance, wages, and higher shipping costs due to the impact of the pandemic on supply chains.

That said, input price inflation remained below the long-run survey average. Prices for services continued to fall, however, reflecting efforts by firms to remain competitive.

Confidence among businesses improved, with firms expecting a revival once restrictions are lifted there is a further roll-out of vaccines.

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