Thursday, August 4, 2011

04/08/2011: Services PMI for Ireland - July 2011

NCB Economics released Services sector PMI for Ireland for July. I posted on latest data for Manufacturing PMI yesterday (here).

Unlike Manufacturing PMI, Services sector data points to continued expansion, albeit at a slower pace. Headline numbers are:

  • Overall Services sector business activity stood at 51.7 (above 50, but not statistically significantly) in July, down from 52.4 in June. Year-to-date average is now at 52.1, against YTD 2010 average of 51.0 and well ahead of YTD average for 2009 of 36.8. 3mo average through July 2011 is 51.5, below 3mo average through April 2011 of 52.1. Hence, overall, disappointing result, but still remaining in the expansionary territory consistently since December 2010.
  • New Business sub-index in July fell marginally to 49.2 from 49.4 in June, marking third consecutive month of below 50 readings. YTD 2011 average is now at 50.0 and marginally below 50.2 reading for January-July 2010, but well ahead of the abysmal 36.2 reading for the January-July 2009 average. 3mo average through July, however is firmly in the contraction zone at 48.9 against 3mo average through April at 51.9.

A more recent snapshot of data:
Other sub-indices also showed renewed weaknesses:
  • Backlogs of work posted a sharp monthly decline from 44.5 in June to 43.9 in July, suggesting severe weaknesses in the short-term pipeline. The sub-index is now in the contraction territory for every month since July 2007.
  • New export business crossed over into contraction territory for the first time since December 2010, with July reading of 49.6 from June reading of 53.1. Year-to-date average for 2011 is now at 53.7, dangerously close to 53.6 reading in the same period of 2010. Most recent 3-mo average is at 52.4, down from previous 3mo average of 54.6.
  • Business expectations reading was the only one that posted positive change, rising from 60.3 in June to 62 in July - a high and strong reading for the indicator. However, 3mo average through July 2011 - at 61.5 - is still below 3mo reading through April 2011 (66.5).
On profitability side:
  • Output prices signaled continued and deepening deflation at 42.3 in July from 43.5 in June, marking 4th consecutive month of dropping output prices.
  • Input prices also eased in index reading, but remain at inflationary levels, with July reading of 50.6 down from June 51.8.
  • So prices wedge acted to reduce further profit margins. Profitability sub-index of PMI has moved to 44.9 in July, marginally better than June 44.8, but still deeply below 50.
Derived index of profit margins in Manufacturing and Services - computed by me, based on NCB data - now show a slowdown in the rate of profit margins depletion in Manufacturing, but widening in Services:

  • Profit margins index in Manufacturing in July stood at -15.01, down from -16.22 in June and well below 12 months average, the 3mo average and comparable readings for 2010.
  • Profit margins index in Services had reached deeper into contraction territory with -16.40 reading in July against -16.02 reading in June. The 12mo average stands at -14.6.
So just as in the case of Manufacturing, Services PMI signals disappointing results for July 2011 and weak signals for forthcoming months.

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