Brexit seen as key cause of services slowdown

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Brexit seen as key cause of services slowdown

Slowest growth in 30 months


Oliver Mangan of AIB
Oliver Mangan of AIB

NEW business growth in the Irish services sector slowed to its weakest pace in two-and-a-half years in April, as UK political leaders dithered over a potential crash out exit from the European Union.

Business managers surveyed in April for the latest Services Purchasers Managers Index (PMI) from AIB blamed the slow down on Brexit, saying the UK political situation had impacted sales.

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It follows data from the manufacturing sectror which had shown industry stock-piled record inventories of finished goods in April as they braced for a possible Brexit caused disruption to supply chains.

The services sector – which spans industries from bars and hotels to banking – is the country’s most important.

The weakness in April fed through to jobs, where payroll expansion was the weakest in over a year.

Meanwhile, business confidence in the sector did improve slightly last month, but stayed close to the six-and-a-half-year low reported in March.

“Not surprisingly, the more challenging international backdrop and ongoing Brexit- related uncertainty saw optimism in the sector remain near to the low recorded in March,” Oliver Mangan, chief economist at AIB, said.

Overall around 38pc of panellists surveyed predict a rise in activity over the coming year, with expectations of stronger customer demand and investments in new products cited as reasons to be optimistic.

The headline seasonally-adjusted PMI posted 54.7 in April, down from 55.3 in March and signalling the slowest rise in business activity in three months.

The PMI is designed to give a single-figure measure of the health of the services sector. Any reading over 50 is deemed growth while numbers from 50 down show contraction.

“Overall, the AIB Services PMI reading of 54.7 for April suggests the Irish economy is continuing to expand at a good pace, though not as strong as in recent years,” Mr Mangan added.

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There was an above-average increase in input prices mainly linked to higher fuel and utilities costs.

Irish Independent