New figures show another contraction in services sector

The month of May saw another reduction in activity in the Irish service sector, according to figures released today.

The rate of contraction eased to its weakest level since September 2008 however, according to the NCB Services PMI survey.

The headline Business Activity Index rose to 39.5, from 32.2 in April. Any figure below 50 indicates a contraction.

The principal cause of the latest contraction was a decrease in new orders in line with the wider economic downturn. The decline was led by business services companies, where activity fell substantially.

Employment in the Irish service sector declined for the 15th consecutive month. The pace of reduction remained considerable, despite easing for the second month in a row to its slowest since November 2008.

Around one-third of respondents noted job cuts during the month, which they largely attributed to an adaptation to reduced workloads. Less than 4% of panellists signalled an increase in employment.

The steepest reduction in employment was in the transport & leisure category, where staffing levels declined for the 12th month in a row. However, the latest fall was the slowest since last November.

Around 32% of respondents forecast activity to be higher in 12 months’ time, largely due to hope that both national and global economies will improve over the coming year. Just less than 31% of panellists expect activity to be lower in the same period, with many forecasting the current recession to continue well into next year.

Clients remained reluctant to commit to new expenditure in May. Consequently, new orders decreased considerably, despite the pace of reduction slowing during the month. New business has now declined in each of the past 16 months.

New orders from overseas also declined, although the rate of contraction was weaker than that for total new business. For the 21st successive month in May, outstanding business decreased.