Strong orders boost services sector

Strong order levels in February saw activity in the Irish services sector increase at its fastest rate for seven months, according to a survey released today.

The NCB Purchasing Managers' Index rose from 53.9 in January to 55.1 in February as confidence, new business and new export levels all increased.

The index, which measures the activities of companies ranging from banks to hotels, shows that activity increased markedly last month and at the sharpest pace since last July.

Respondents said a higher level of new orders was the main factor behind activity growth, the first in six months, as the new business index rose sharply from 47.7 in January to 53.3.

Export growth experienced its steepest rise since June, climbing from 55.1 in January to 56.6 last month, amid growth in the Asian and UK markets.

Input costs increased in line with rising fuel prices prompting the fastest decrease in profitability levels for 12 months.

However, intense competition prevented service providers from passing on higher cost burdens to clients last month.

The survey said charges fell at a "solid pace" from 42.7 in January to 46.1 last month, extending the period of decline to 31 months but at the weakest pace since September 2008. .

Staffing levels at Irish services companies were broadly unchanged and the backlog of work decreased in February, extending a three and a half year trend.

Meanwhile, the Markit Eurozone Services Purchasing Managers' Index (PMI) rose to 56.8 in February from 55.9 the previous month. The figure was revised slightly lower from a preliminary reading of 57.2 but is still its best showing since the euro zone exited recession.

February marked the 18th month the services PMI has been above the 50 mark dividing growth from contraction.

While the survey showed signs of improvement in struggling economies like Spain and Ireland, it provided further evidence that the recent energy and commodities price boom is starting to trickle down to consumers.

"Rates charged by services providers showed a worrying upturn, registering the largest monthly increase since July 2008," said Chris Williamson, chief economist of survey compiler Markit.

"Hotels and restaurants and transport and travel companies saw particularly steep price hikes, seeking to pass higher food and fuel prices on to customers."