Ireland's services sector shrank at a record rate in August and has now contracted for seven months in a row, although confidence improved somewhat from July, data showed today.
The NCB Irish Purchasing Managers' Index showed business activity, employment and new business all fell last month at the sharpest pace ever recorded in the 8-year history of the series.
The headline business activity reading for the sector, spanning services from IT to insurance, dropped further below the 50 divide between growth and contraction to hit 39.8, undercutting the previous survey low of 41.4 recorded in July.
"New orders contracted at a sharp pace in response to the slowdown in construction and the credit crunch and employment contracted for the sixth month as firms sought to cut costs in the face of weaker activity," said Eunan King, chief economist at NCB Stockbrokers.
The index measuring business expectations rose to 56.7, but firms remained only slightly more optimistic than after the September 11 attacks on the United States in 2001, when the index stood at 55.5. It hit a record low of 52.8 in July.
Irish house prices are falling after quadrupling over the previous 10 years, making homeowners much more wary about spending and forcing construction companies to cut back their use of other services.
"The degree of confidence amongst service providers improved on July's survey low, but remained subdued by historical standards," said Markit, which compiles the data.
Weak demand and a recent fall in oil prices helped to ease inflationary pressures. At 63.2, input prices rose more slowly than in July, when the rate reached a more than 7-year high of 68.9, while the output prices index at 49.4 showed companies holding down their charges.
Irish manufacturing activity continued to contract last month although at a slower pace than in July as poor demand, a strong euro and job worries took their toll, a separate survey showed on Monday.