Service sector business falls for first time in six months

BUSINESS activity in the service sector fell for the first time in six months in September, wiping out the strong growth seen in June and July.

The latest monthly purchasing managers’ index (PMI) for the service sector by NCB Stockbrokers showed a drop below the neutral 50 point mark in the headline activity index, to 48.8 points, compared with 52.9 points in August.

“Anecdotal evidence suggested that the fall in activity partly reflected a drop in new order levels amid a slowdown in the wider economy,” the commentary said.

“Some panellists mentioned continued difficulties emanating from problems in the housing market.

“There were also reports that outstanding business had been depleted in an attempt to support activity,” it added.

Business confidence within the sector also dropped, with that index falling from 68.6 points to 66 points, to its weakest level since last April, although long-term confidence levels remain intact.

On a better note, new export orders increased in September.

And although employment levels continued to fall, the latest monthly rate of job shedding was only fractional and the weakest seen for 29 months.

Profitability levels at service companies also continued their ongoing cycle of decline.

This decline has been evident since the beginning of 2008, with a further reduction in output prices being the main culprit. But ongoing cost cutting measures, including further salary reductions, produced a weaker decline in the latest index.

“Despite the falls in activity and new orders in September, service companies were still optimistic regarding the future prospects for activity, predicting strengthening demand, particularly from international markets.

“However, the level of sentiment was the weakest since April,” NCB said.