Ireland service sector stalls as demand slows
Ireland’s services sector posted anaemic growth in May with new export orders just making up for weak domestic demand, a new survey has show.
The NCB Purchasing Managers’ Index, which measures activity in the services sector nudged up to 50.5 from 50.2 in April, just above the 50 mark separating growth from contraction.
New business in the services sector fell to its lowest level in four months of 48.2, down from 50.6 last month on poor domestic demand. But export orders increased slightly and firms made progress in a backlog of work, the figures showed.
“The NCB services PMI is consistent with the flattish outlook that the official data have shown with regard to domestic demand,” said Brian Devine, economist at NCB Stockbrokers, citing falling consumer confidence and flat retail sales.
Ireland needs to get its recession-racked economy growing again if it is to shoulder a debt burden set to peak at around 120 percent of Gross Domestic Product (GDP) in 2013 and persuade international investors to lend to it once an EU-IMF bailout package runs out that year.
The median forecast of economists polled by Reuters this week was for Ireland’s GDP to grow by 0.55 per cent this year but that forecast may be downgraded when first quarter GDP figures are published later this month.
Ireland’s medium-growth prospects are crucial to its debt sustainability and any move to cut current forecasts of annual average growth of over 2 percent per year in 2012-2016 would set alarm bells ringing.
Continued cutbacks and high levels of personal debt in Ireland have forced services firms in sectors such as IT and telecoms to look abroad and depend increasingly on exports.
“In contrast to the fall in overall new orders, new export business continued to rise in May,” the authors of the survey said in a statement. “A number of respondents reported that they had increased marketing activities in external markets.”
Despite the growth, job numbers fell after growth was posted in April for the first time in almost three years.
The number of people claiming jobless benefit hit a five-month high in May, data on Wednesday showed.
Higher fuel prices drove increases in input prices, which have increased in each of the past six months.