Demand from US and UK drives activity in services sector

Activity in the services sector increased sharply in August on the back of strong demand from export markets such as the United States and Britain, figures released this morning show.

Investec’s Services Purchasing Managers’ Index (PMI) hit 62.4 in August, ahead of the 61.3 it recorded in July, indicating strong growth across the sector during the month.

Any reading above the index benchmark of 50 indicates growth on the previous month while any result below that figure means that activity contracted.

According to Investec, which released the index this morning, data for the four industry sectors – business services, financial services, technology, media and telecoms, and travel and leisure – showed that they have all grown over the last seven months.

Philip O’Sullivan, the firm’s chief economist, said the index shows that services companies benefitted from increases in new business both at home and abroad.

“The rate of growth in incoming new export business accelerated for the third month running to the fastest since April, with the run of above-50 readings in that index now stretching to 37 months,” he said.

“ Panellists cited the US and the UK as key sources of new work from abroad,” Mr O’Sullivan added.

A number of respondents indicated that the US had been the main source of business from overseas.

The strong performance by the Republic’s services industry follows figures earlier in the week showing that manufacturing grew at its fastest rate in 15 years in August as factories’ order books surged.

The manufacturing PMI advanced to 57.3 in August from 55.4 in July, well clear of the divding line between growth and contraction. The Republic's performance was in contrast to a cooling of activity in Europe and Asia.

The figures released today show that the services industry has grown every month for the last two years.

They also indicate that the numbers working in in the industry grew in August, and that the rate of job creation quickened from the previous month.

Business sentiment amongst those surveyed was the lowest so far in 2014 during August, indicating a slight dip in optimism.

However, sentiment remained above average, according to Investec, and respondents indicated that improving conditions in the Republic and abroad would support growth over the coming 12 months.

The index is based on responses to a questionaire sent to a representative panel of around 450 private-sector service companies.