Service sector activity falls for sixth month causing slump in confidence

CONFIDENCE among service sector firms slumped to the lowest level ever last month as activity fell for the sixth month in a row.

The latest NCB Services PMI index showed the fall in activity last month is the longest uninterrupted fall in the eight-year history of the survey and came as a result of falling new business volumes.

Firms said they were fearful that weakness in the construction sector would spread into the wider economy and affect activity a year ahead.

The business activity index also fell to a survey low for the third month and has been on a downward trend since the start of the year.

New business levels contracted sharply, with the rate of decline accelerating to a new survey record.

Firms said they were noticing weaker demand from clients in Europe and the US as new export work continued to fall at service providers in July.

New work from abroad has declined for seven months running, although the rate of contraction slowed since June.

NCB chief economist Eunan King said: “Rising input costs in conjunction with weak demand is putting significant pressure on firms in the services sector.

“Business activity in the services sector is at its weakest reading since the survey began. Unsurprisingly given this background, employment is contracting as firms seek to make cost savings.”

The survey showed rising input prices, alongside falling demand, has led firms to reduce staffing levels as part of efforts to make cost savings.

Input prices increased at the sharpest pace since May 2001 with the rate of cost inflation linked to rising oil and fuel costs.