The services sector experienced a further loss in momentum last month, according to the latest AIB Ireland services purchasing managers' index (PMI).
Total activity, new work and outstanding business at services businesses all rose but at their slowest rate in the past 21 months, and expectations slumped amid growing feats of recession, the energy crisis and rising living costs.
Input price inflation picked up from a recent low in October, and charge inflation eased while remaining among the highest on record.
Overall, the services business activity index was measured at 50.8, down from 53.2 in October, marking a 21st consecutive month of growth. The reading is the lowest in the current sequence of growth and behind the long-run trend of 55.1 for a fourth successive month.
Growth was maintained in three of the four sub-sectors: technology, media & telecoms (55.9), financial services (52.6) and business services (51.3). Transport, tourism & leisure (40.2) posted a third straight monthly drop, contracting at its fastest rate since February 2021.
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"The AIB Irish Services PMI for November showed a considerable loss of momentum in activity in the sector. The Business Activity Index fell to 50.8 from 53.2 in October," said Oliver Mangan, chief economist at AIB.
"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, which registered a reading of just 40.2 for business activity.
"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."
The marginal increase in overall activity reflected a near stagnation in demand for services, with new business increasing at its slowest rate for 21 months as companies reported caution among customers due to inflation and economic uncertainty.
Demand fell in both transport, tourism & leisure and business services and slowed down in financial services. Growth of new export business was broadly in line with lows seen since early 2021.
Backlogs increased to the weakest extent in the past 21 months, with outstanding business falling sharply in transport, tourism & leisure and slower increases in business services and financial services.
The services sector workforce continued to expand in November, although the rate of job creation eased to the weakest in 2022 so far. Transport, tourism & leisure bucked the overall trend with only a marginal rise in staffing.
Confidence among Irish service providers regarding the next 12 months weakened in November as recession fears, the energy crisis and rising living costs all weighed on confidence.
Sentiment was among the lowest seen during the past two years, with expectations weakest in business services and transport, tourism & leisure.
Average input prices continued to rise sharply in November, linked to electricity prices, materials, wages, fuel and insurance among other costs. The rate of inflation accelerated slightly, but remained below the trend for 2022 so far.
The rate of charge inflation eased to a three-month low but remained among the highest on record.
"Nearly all of the main components of the Irish survey showed clear signs of a weakening trend in November. Growth in new business slumped from 55.7 to 50.6, with both Business Services and Transport/Tourism/Leisure posting outright contractions in new work," Mangan said.
"The rate of growth in new export business also slowed sharply. This saw a marked easing of capacity pressures, with backlogs of outstanding business rising at the slowest pace in 21 months. Indeed, the Transport/Tourism/Leisure sector recorded a sharp fall in outstanding work."
He added: "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.
"Businesses continued to experience strong upward pressure on input costs, most notably electricity prices, fuel, wages and materials, with the rate of inflation accelerating in November. Higher costs continued to be passed on to customers in the form of higher prices, which again registered marked increases in all four sectors covered in the survey."
(Pic: Getty Images)
