Time to update my earlier post on PMIs - this time with new data on services PMIs. The original post is here. Once again, the data is from NCB Stockbrokers PMI release and you can read their very good objective analysis on their site.
New business activity in the chat above is the one to worry about going forward. Giving a snapshot of more recent periods:
Here, both, the flattening out of the expansion rate in total business activity and the decline in the growth of new business activity are pretty clearly evident. Nonetheless, both series are above 50, signaling continued expansion.
Underlying macro parameters are a mixed bag. Business expectations are still improving and are pretty robust, though the rate of improvement is slipping. More dramatic is the slippage in the rate of new export business orders expansion. In the mean time, contraction continues across services employment and profitability, though the rate of contraction is slowing and is almost reaching zero.
Unlike in the case of manufacturing PMIs, services-related prices are trending in the right direction:deflation is setting in once again in input prices and deflation is ongoing, but at a slowing rate, in terms of output prices.
Putting services and manufacturing sectors side by side, first consider the employment picture:
Both employment pools are contracting. Manufacturing employment has crossed into negative growth territory, while employment in services sectors is falling at a slower rate than before.
Lastly, putting side by side actual PMIs:
Expansion in manufacturing has been under pressure in Ireland over the last three months. Meanwhile, services sector has been on expansionary path since the beginning of the year.
Of course, PMIs are not a perfect signal for near term future of the overall economic activity. Nonetheless, the series have been signaling weak expansion for almost 7 months now. This is the good news. The bad news is that there is low degree of confidence in the gains made so far, especially in manufacturing. In all likelihood September-November will be the key months when it comes to either stabilizing economy in a growth mode, or triggering a double dip. In my view, the risk of the latter before the end of Q1 20111 is around 40-45% and rising.