The latest data from CSO on Services Index will be analysed in the subsequent post, but for now a health warning reminder: Services PMI has barely any bearing on the actual Services activities in Irish economy:
Basically, correlation – from January 2009 through July 2013 – between the Services PMI and CSO Services Activity Index is exceptionally poor: it stands at just 0.1367. Services PMI readings have no explanatory power when it comes to tracking performance of the Services Activity Index. On log-changes chart, PMI is capable of capturing just 0.0071% of variation in Services Activity Index. On straight levels even less. Lags are not yielding any meaningful improvements in explanatory power, neither do non-linear models.
In my view, this testifies to the extreme skews in PMI survey data to reflect the role of MNCs in ICT and IFSC sectors here.