Friday, August 3, 2012

3/8/2012: Irish Services PMI: Disappointing July

So following cracking Manufacturing PMI performance in July (see posts here , here and here on the subject), it was only predictable (based on all indicators relating to the sector activity) that Services PMI will put a boot into our hopes for growth. In that, the PMIs did not deviate from forecast.

Irish Services activity continued to decline in July, with headline PMI for Business Activity falling to 49.1 from 49.4 in June. This marks third consecutive month of sector activity below 50 reading. 12mo MA is now at 50.7, well ahead of the current reading. 3mo average through July is at 49.2 - signaling mild contraction, previous 3mo average through April is at 52.5. In 2011 3mo average for the same period was 51.5 and in 2010 it was 54.5. Not good dynamics for 2012 since May.

New Business activity also slowed down to 49.5 from barely expansionary 50.3 in June. 12mo MA is at 50.2 - effectively showing zero growth, while 3mo average through July is at 49.8 (ditto, but to the downside risk) and this contrasts with relatively robust 52.8 3mo average through April 2012.

Looking at the snapshot of the recent activity clearly shows lack of any breakout momentum in the series from the flat growth trend established around Q4 2010.

Other sub-series were all over the place.

  • Employment tanked to 48.3 from already abysmal 49.2 in June. This is not surprising, as the sector has been signaling employment losses pretty much uninterrupted since the beginning of the crisis. 12mo MA is now at 48.1.
  • Output prices continued to contract at 44.2 from 44.6 in June, while input costs rose at 52.3 on foot of 52.7 in June. Which means profitability tanked.
  • New export business indicator jumped to 55.7 in July from 54.2 in June, but this is hardly surprising, since the index has been showing robust expansion for 12 months now, following a surprise drop to 49.6 in July 2011. 12mo MA is at 53.2, 3mo average through July is at 54.2. These are really hardly credible numbers, or rather, these are the numbers showing that our Services sector exports have very little to do with employment or overall business activity in the sector itself. In other words, this shows that our services exports are as captive to MNCs as our manufacturing exports.
  • Profitability - as measured by PMI (note, I produce my own metric, which will be reported later) - tanked again to 43.8 in July against 43.0 in June.

In the next couple of posts I will be covering combined results for Manufacturing and Services PMIs and a special note on Confidence metric - in honor of the KBC/ICA 'survey' results released yesterday.

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