Ireland: Expansion in services slows to an almost one-year low in October
November 3, 2017
The Investec services Purchasing Managers’ Index (PMI) dropped from 58.7 in September to 57.5 in October, an 11-month low. The result reflected a softer expansion in business activity. Despite the decrease in the headline figure, the index remains comfortably above the 50-threshold that separates expansion from contraction in the services sector, where it has been for over five years.
October’s figure reflects slower growth in business activity, even though growth in new orders and business accelerated notably. The increase in new business partly reflects growth in export orders, particularly from the EU and the United States. Backlogs of work increased in the surveyed month, with growth accelerating to its fastest rate since January 2016. This rapid acceleration compelled service providers to hire additional staff. Regarding price developments, input costs and output prices both increased as higher input costs were passed on to clients. Higher staffing costs were chiefly behind the increase in input costs.
Commenting on the business expectations index, Philip O’Sullivan, Investec’s Chief Economist for Ireland, said:
“Somewhat puzzlingly, the forward-looking Business Activity: Expected Levels in 12 Months’ Time index weakened to its lowest since September 2016 in spite of the stronger client orders cited above. A number of respondents expressed concerns about customer sentiment, although it should be noted that nearly six times as many firms expect growth compared to those who expect a moderation in business activity over the coming year. Given the favorable economic outlook for the majority of Ireland’s key trading partners and the domestic economy, we are in the camp of those who expect 2018 to be another year of progress for the services industry.”