Ireland: Services PMI nosedives to record low in April
The AIB services sector Purchasing Managers’ Index (PMI) plunged to 13.9 in April from 32.5 in March, marking the lowest reading in the survey’s two-decade history. Thus, the index fell further below the 50-threshold that separates expansion from contraction in business activity, as Covid-19 induced lockdown measures dealt a heavy blow to the services sector.
April’s deterioration was broad-based, with both business activity and new business falling at unprecedented rates. Moreover, employment declined at a record pace in April, as around 40% of firms report having had to cut staff in the period amid the lockdown. On the price front, input costs fell at the quickest pace in over a decade due to lower fuel and wage costs, while firms cut output charges to a seven-year low in a bid to entice demand. Lastly, the 12-month outlook deteriorated to a new record low in April as the majority of firms expected activity to fall further from current levels. The tourism sector was the most pessimistic.
Commenting on the reading, Oliver Mangan, AIB Chief Economist, noted:
“The extent of the weakness in April is truly remarkable: 78% of firms reported lower business activity; 80% recorded declines in new orders; over 40% of companies cut staff numbers, while almost 60% saw a decline in order backlogs. Furthermore, the recessionary conditions saw both input and output price declines in all four service sectors. The national lockdown to contain the spread of the coronavirus clearly decimated service sector activity in April. One glimmer of hope was that business sentiment may be stabilising, with the index for the outlook for the next 12 months falling only slightly after its big plunge in March.”