The April AIB Services PMI data reveal a historic plunge in activity in the sector, as the economy shut down to halt the spread of the coronavirus outbreak. 

All six non-price indices registered the lowest levels since the index was launched 20 years ago, covering total activity, new work, exports, backlogs, employment and business expectations.

The headline Business Activity Index continued its historic descent to 13.9, the fastest decline in service sector output ever recorded. The month-on-month decrease, at 18.6 points, was smaller than March’s 27.4-point plunge, but far exceeded anything else in the series to date. More than three-quarters of firms, at 78%, recorded lower activity at the start of the second quarter. 

All four sub-sectors registered unprecedented contractions in April, with two — Transport, Tourism & Leisure and Business Services — recording single-digit index readings of 5.2 and 7.4 respectively. Financial Services (23.5) posted a slightly weaker fall than Technology, Media & Telecoms  at 20.0. 

The only indicators to avoid record lows were the two price indices. Even so, average input prices still fell at the sharpest rate since March 2010 as firms reported lower wage and fuel costs. Meanwhile, companies cut their own fees the most in seven years, in an attempt to bring in revenues amid the lockdown. Before March, charges had risen every month since April 2014. 

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Employment fell at the fastest rate in the 20-year survey history. Around 40% of firms reported staff cuts, though some of these were reported as temporary layoffs or reduced hours. 

And the future was reckoned as bleak, too. Nearly half of respondents, at 47%, said they expected a decline from current levels, compared with 31% expecting an increase, pushing the Future Activity index to a new low since the series began in May 2000. 

More encouragingly, the 1.3 point drop in the index was far less than March's 24.9-point collapse, indicating that sentiment had bottomed out at the start of the second quarter. By sector, Travel, Tourism & Leisure was most pessimistic, and Technology, Media & Telecoms the least. 

Sentiment Stabilises

Chief economist Oliver Mangan said: "The extent of the weakness in April is truly remarkable: 78% of firms reported lower business activity; 80% recorded declines in new orders; over 40% of companies cut staff numbers, while almost 60% saw a decline in order backlogs. 

“Furthermore, the recessionary conditions saw both input and output price declines in all four service sectors. Overall, the business activity index collapsed in the month to just 13.9, by far and away the worst reading in the 20-year history of the survey.  The previous low was 31.8 during the depths of the global financial crisis in 2009. The index stood at 59.9 as recently as February. 

"The April reading is not a surprise as flash April services PMIs for the Eurozone and UK also show very sharp declines to record lows of 11.7 and 12.3, respectively, just below the Irish figure. All four sectors covered in the Irish survey registered unprecedented contractions in business activity – indeed, the index readings for Transport/Tourism/Leisure and Business Services fell to just 5.2 and 7.4, respectively," Mangan added. 

"The national lockdown to contain the spread of the coronavirus clearly decimated service sector activity in April. One glimmer of hope was that business sentiment may be stabilising, with the index for the outlook for the next 12 months falling only slightly after its big plunge in March."