Activity in the services sector fell at a faster rate in November than the previous month, according to the AIB Services PMI.

New business declined only slightly, contributing to a rise in outstanding work for the first time since February. Employment shrank further, but at the slowest rate in the current nine-month period of retrenchment.

Sentiment on the 12-month outlook for activity was the strongest since January, amid growing hope for a coronavirus vaccine next year.

The Business Activity Index fell to 45.4 in November, from 48.3 in October, the second correction in the past three months, and the strongest month-on-month decline in output since June. Outside the pandemic period, the latest figure was the lowest registered since January 2010.

AIB chief economist Oliver Mangan commented: "With much of the sector back in lockdown during the month, the PMI lost some ground in November. The Irish index was well above the flash PMI reading for the Eurozone which fell to 41.3, and broadly in line with the UK flash number of 45.8. As elsewhere, the fall in this lockdown has been nowhere near the collapse during the first lockdown in the spring.

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"Not only that, there were some encouraging trends in many of the indicators within the survey. Despite the shutdown, the rate of decline in new business was very modest. Furthermore, there was a move to near stabilisation in employment levels in November.

"The sub-sector data show that the Transport, Tourism and Leisure sector again posted by far the sharpest contraction in activity, reflecting the fact that it has been the most impacted by Covid restrictions. Encouragingly, the other three sectors saw new business expand and rising order backlogs."

Mangan added: "One concern is a margin squeeze, with input prices rising at their fastest rate since February but output prices declining as a result of the impact of Covid restrictions on demand. Firms are more optimistic about the 12-month outlook for activity, driven by the hope that the positive news on vaccines will allow for a return to more normal business conditions over the course of next year."

The seasonally adjusted Composite Output Index of both manufacturing and services sectors fell to 47.7 in November, from 49.0 in October. While manufacturing registered a small increase in output, service sector activity fell the most since June, offsetting that rise.