Services sector hit by severe weather

THE Irish services sector activity shrank at its sharpest rate in almost a year last month following severe weather conditions that dampened customer confidence.

After staying about the 50 mark for seven of the last eight months the NCB services PMI fell to 47.4 from 50.8 in December, signalling contraction.

New orders also fell sharply from 49.0 to 46.2 in December.

NCB economist Brian Devine said freezing weather conditions were again highlighted by panellists, as well as delays caused by fragile client confidence. “We would caution against reading too much into the December figures because of the weather, but would instead view December and January as one month when that data becomes available,” he said.

Despite the fall in activity, companies remained optimistic that output will be higher at the end of 2011. Panellists predicted client confidence to improve over the next 12 months, while they continued to expect growth from export markets.

The employment index fell from 48.7 to 47.8 with the current sequence of declines now extending to 34 months.

Bloxham stockbrokers said Ireland’s services industry suffered a similar contraction during the last cold snap in January 2010 when the headline figure dropped to 44.4 from 48.3 before recovering back to 48.8 a month later.

The new export business component of the services industry index fell to 49.7 from 54.4, snapping a 15-month run of growth.

“Although these latest figures are somewhat disappointing we are confident the services sector PMI will bounce back in the coming months,” said Bloxhams.

Davy analyst Conall Mac Coille said: “For most of the last decade, services sector growth in the developed economies has outstripped the manufacturing sector, which has suffered from heightened competition from emerging economies, particularly in Asia. However, at least for now this trend has reversed.”