Ireland sees the slowest growth in business activity in 21 months

Recession fears, the energy crisis, and rising living costs weigh on confidence
Ireland sees the slowest growth in business activity in 21 months

The index was again weighed down by a very weak performance by the transport, tourism and leisure sector.

Growth of activity and new business within the Irish economy slowed to a crawl in November as recession fears, the energy crisis, and rising living costs weigh on confidence.

New survey data from the services sector reveal a further loss of momentum. While total activity, new work and outstanding business all rose last month, the rates of expansion were each the slowest in the respective 21-month growth sequences.

The latest AIB purchasing managers index (PMI) for non-manufacturing sectors including business, financial, telecoms and hospitality stood at 50.8, marginally above the 50-point mark which indicates expansion and down from 53.2 in October.

Growth of activity was maintained in three out of four sub-sectors with technology, media & telecoms overtaking financial services as the fastest-growing category with the sharpest expansion since June. Financial services posted a marked slowdown since October but still outperformed business services which posted the weakest rise in activity in its 21-month growth sequence.

The main source of weakness was transport, tourism & leisure which stood at 40.2, a third straight monthly drop in activity and at the fastest rate since February 2021.

AIB economist Oliver Mangan said the November data showed a considerable momentum loss.

“As has been the pattern in recent months, the index was again weighed down by a very weak performance by the transport/tourism/leisure sector,” he said.

“The overall services index, though, remains in expansion territory at above 50, unlike elsewhere. The flash Services PMI readings were all again in contraction territory in November in the US, UK and Eurozone, at 46.1, 48.8 and 48.6, respectively,” Mr Mangan said.

Businesses reported that input prices continued to rise sharply linked to electricity prices, materials, wages, fuel and insurance among other costs. The rate of inflation accelerated slightly from October’s nine-month low.

Tied to inflation, the rate of increases in prices charged by Irish service providers eased to a three-month low. However, it was still among the highest on record, with the seasonally adjusted prices charged index at the eighth highest level to date.

New business across all sectors rose at the slowest rate in the current 21-month growth sequence as companies reported caution among customers due to rising economic uncertainty and high inflation.

A positive from the survey of 400 firms was that the service sector workforce continued to expand in November. The rate of job creation eased to the weakest so far this year but remained strong overall.

Transport, tourism & leisure bucked the overall trend with only a marginal rise in staffing.

“The one ray of light was another impressive rise in employment. However, firms’ outlook for the next 12 months fell back again, as recession fears, the energy crisis and rising inflation all weighed on confidence,” Mr Mangan said.

Last week the Manufacturing PMI recorded a sharp contraction dropping to 48.7 new orders, including export orders, declined for a sixth consecutive month driven similarly by fears over a global recession.

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