Services sector continues growth in June

The services sector continued to grow in June, expanding for the 11th month in a row and picking up pace from May.

According to Investec’s monthly Services Purchasing Managers’ Index, employment in the sector rose at the sharpest rate since January.

The headline index, which provides a measure of the overall health of the services industry, rose to 54.9 last month, accelerating from May’s reading of 52.7 and staying above the 50 mark that separates expansion from contraction.

The increased business activity was attributed partly to higher sales and increased tourism during the month.

The survey indicated a broad based improvement, with unadjusted data for the four sub-sectors - business services, financial services, telecoms, media and technology, and transport and leisure - showing expansion.

New business grew yet again, with new export business expanding for the 23rd month in a row. The pace of growth in new business also accelerated during June to the fastest in five months, driven in part by stronger demand from the US and UK.

Businesses were also increasingly confident, with optimism the strongest since May 2010, and firms expecting the uptick in new business to continue over the coming year.

Investec Ireland chief economist Philip O'Sullivan said the latest data was "very encouraging".

“A particular highlight within today’s report is the employment component, which points to the sharpest rate of job creation since January,” he said. “Services firms in Ireland have been adding workers for each of the past 10 months. This growth is widespread, with unadjusted data for each of the four sub-sectors covered by the survey posting an increase in employment during June, the third month running in which this has been the case.”

Output prices fell modestly, as strong competition extended the trend to 59 months. But Irish services firms were more profitable than before, with profitability increasing during the second quarter for the first time since December 2007.

This change in fortunes was linked to increased sales and success in limiting costs.

Mr O’Sullivan predicted the optimism would lead to further positive PMI readings for the rest of the year.