Services activity accelerates at sharpest rate since Brexit vote

Ireland's services sector grew at its fastest rate last month since Britain's vote to leave the European Union in June.

Investec’s latest purchasing managers’ index (PMI) for the services industry rose to 61 in January, well above the 50 mark that separates growth from contraction, marking 54 successive months of growth.

A key highlight was the pick-up in new business, which quickened for the third successive month and was the fastest for a year.

New orders have now increased on a monthly basis throughout the past 4½ years, with the latest expansion linked to stronger client sentiment and a focus on sales, the survey said.

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The sub-index for new export business, which dipped marginally into negative territory in November, recorded its second successive monthly increase, helped by stronger demand from the UK.

A similar Investec barometer for manufacturing painted a similar picture with new orders expanding at the fastest pace in 18 months.

Input cost inflation

On a less positive note, services companies continue to endure a sharp rate of input cost inflation, with the latest spike in prices attributed to higher staff costs; rises in the costs of fuel and energy; and the euro’s weakness against the US dollar.

“Firms were, however, able to pass on at least some of these cost pressures by hiking average prices charged,” Investec’s Philip O’Sullivan said.

The survey’s sub-index for profitability remains in positive territory, albeit the rate of expansion here eased to the weakest seen in the current three-month sequence of growth.

Staff levels also increased on foot of higher output requirements and business expansion plans, the survey indicated. The rate of job creation remained sharp, despite easing marginally from the 10-month high seen in December. “When all of the above is taken together with this week’s manufacturing PMI release, it is clear that 2017 has got off to a bright start for much of the private sector in Ireland,” Mr O’Sullivan said.