Irish services PMI hits survey low in June

Ireland's services economy shrank last month at the fastest pace in at least eight years, battered by rising costs and the collapse of credit-driven housing booms at home and in the United States, a survey showed.

The headline gauge of the NCB Purchasing Managers' Index survey fell in June to 41.9 from 43.9 the month before, showing the services economy - covering companies ranging from trucking to IT - contracting for a fifth straight month.

Last month's level of the headline business activity index was the lowest since the survey began in May 2000.

So were the survey's measures of employment, new business and work yet to be completed, which all sank deeper below the 50.0 divide between growth and contraction.

Meanwhile the inflationary pressures that are widely expected to prompt the European Central Bank to raise euro zone interest rates later on Thursday eased only slightly, with the input prices index at 65.1 in June from May's 66.8.

"Activity in the services sector is being squeezed by rising costs and a deterioration in the wider economy," said Eunan King, chief economist at NCB Stockbrokers. "The environment remains tough."

Business confidence fell to 58.4 last month from 59.3 in May and was at its lowest since the September 11 attacks in the US in 2001.

"Firms that expected activity to be lower in 12 months' time mentioned expectations that economic conditions would deteriorate in the coming year," said Markit, which compiles the survey of about 600 Irish companies.

The headline index has fallen from levels around 65 in mid-2006 as the end of an Irish housing boom combines with a sharp slowdown in the US economy to undermine demand for services.

The new exports index slid to 43.0, its lowest level since April 2003, from 48.4, while new business dropped to 40.1 in June from 44.4 in May, showing the biggest collapse in demand in the survey's history.

That prompted businesses to shed staff at the fastest pace in the survey, and the employment gauge fell to 46.7 from 47.3.

"Many firms reported that departing staff would not be replaced, given current economic conditions," Markit said.