Ireland: Irish Services PMI moderates in June
July 5, 2016
The Investec Services Purchasing Managers’ Index (PMI) dropped from 61.7 in May to 61.2 in June. Despite the drop, the index remains above the 50-threshold that indicates expansion from contraction in the services sector. The PMI has been in expansionary territory for nearly four years.
June’s moderation reflected a sharp drop in business which fell to a multi-year low. Sentiment was dragged by the economic uncertainty stemming from the EU Brexit referendum. However, fast expansions were recorded in new business and business activity. Regarding price developments, input cost rose sharply in June on the back of rising staff costs and Irish service companies passed higher input costs to consumers.
According to the survey report, “at the outset we would note that the survey opened on the 13th of June and closed on the 27th, so the majority of responses were provided before the results of the UK’s EU referendum were known. The individual components of the Services PMI suggest cautious positioning on the part of firms and their clients ahead of the vote, with most increasing at a slower pace than in the previous month. […] Given the above and rising global economic uncertainty, it is unsurprising to see that Irish services firms slowed the rate at which they are adding to headcounts, with the rate of job creation implied by the Employment component falling to a 25 month low. Despite the additional labour resources available to services firms and slower growth in new orders, the Business Outstanding component shows that backlogs of work continued to rise in June”.