Sharp rise in services sector activity - NCB

IRELAND’S SERVICES sector shrank at its slowest pace in 18 months in August as businesses become more optimistic about the future, according to a new survey.

The NCB Purchasing Managers’ Index – which measures activity in the services sector – rose to 46.7 from 42.4 in July, but remained below the 50 mark that indicates expansion. This monthly rise was one of the sharpest upward movements in the survey’s history.

This week has seen a number of broadly positive economic indicators with exchequer returns showing the Government collected €150 million more than expected in tax receipts in August while the number of people joining the Live Register has continued to slow.

Brian Devine, economist at NCB Stockbrokers, said it was encouraging that the measure of new export business had risen to just short of the 50 mark as strong exports were essential for a small, open economy such as Ireland to emerge from recession.

“The key stimulus for the Irish economy will come from regaining competitiveness and attracting demand as the global economy recovers,” Mr Devine said.

A subindex measuring business expectations rose to a 14-month high of 56.9.

“For the fourth consecutive month in August, companies were optimistic regarding future activity levels,” said Markit, which compiles the data.

According to the survey, while job cuts in the services sector remained severe, the number of people laid off in August was the lowest in almost a year.

Firms have reduced employee numbers in response to falling workloads and to cut costs.

Input costs fell for the eighth consecutive month, mainly as a result of wage cuts and competition, with the reduction last month the fourth-fastest in the history of the survey.

This contributed to a fall in output prices, reflecting competition for new business.

Among the four broad sectors; financial services, technology and telecoms, transport and tourism and business services, the financial services sector was the only one to report a fall in activity.

Britain’s services sector grew at its fastest pace in nearly two years last month, lifted by a surge in optimism by firms.

The headline business services activity index from CIPS/Markit rose to 54.1 in August from 53.2 in July, the highest since September 2007.

The euro zone services economy jumped back almost to recovery in August, with Germany returning to growth.

Markit’s euro zone services PMI rose to 49.9 in August from 45.7 in July.