Ireland: Services PMI declines in July
While conditions in the Irish services sector remained buoyant in July, they deteriorated from the previous month. The Investec service Purchasing Managers’ Index (PMI) fell to a four-month low of 57.4 in July, down from 59.5 in June. The index remained above the critical 50-point threshold that separates expansion from contraction in the sector, where it has been seated for more than five years.
Favorable business conditions fueled a strong rise in new orders, which in turn supported solid growth in output. New business has now been on the climb for six consecutive years, with a sharp increase in new export business from key overseas markets. Consequently, backlogs of work expanded at a swifter rate compared to the previous month. Firms hired more workers in response to the rise in outstanding business, with the rate of job creation accelerating to a seven-month high in July. On the price front, rising staff costs along with higher prices for beverages, fuel, insurance and rent led to an upsurge in input costs. Firms responded to higher input costs by increasing their output prices. Profits accelerated for service providers, rising at the swiftest pace in almost a year, thanks to improvements in sales and productivity.
Commenting on the business confidence index, Philip O’Sullivan, Investec’s Chief Economist for Ireland, stated:
“The forward looking Business Activity: Expected Levels in 12 Months’ Time index slowed to a four month low, although nearly half of panellists expect to see output growth over the coming year[…]Taken together, this week’s PMI releases suggest that while the rate of growth in activity across much of Ireland’s private sector has slightly softened from the multi-month highs recorded in June, it remains substantial.”