July activity in services sector buoyant

Activity in the services sector picked up faster last month than at any point since last November, according to the latest NCB Purchasing Managers' Index.

The figures, released yesterday, show that services firms were both busier and more confident in July, with volumes of new business climbing for the fourteenth month in a row.

The overall business activity index marked a level of 59.4 last month, following a dip down to 56.8 in June. A reading above 50 signals expansion.

"The sharp upturn in business outstanding suggests the recovery will continue and bodes well for employment," said NCB senior economist Mr Eunan King.

"The overall economy appears to be in good shape," he added.

NCB's new business index climbed from 57.5 to 60.8 in July, reversing a June fall.

Services firms said their customers had responded well to new marketing and advertising initiatives.

Many companies reported strong competition and the need to offer incentives to clients to stimulate growth.

There was also evidence of growing demand for services from overseas clients, with some firms pointing to increased demand from the newer European Union states.

A large number of firms responding to NCB's survey cited backlogs of work in July, with companies active in business services operating at capacity.

Participating companies said they were optimistic about potential developments over the coming year, with EU enlargement again cited as a driving factor.

NCB said there was "a shared belief" that rising volumes of new business could be sustained.

This confidence trickled through into employment levels within the sector, with staff numbers climbing for the eleventh successive month.

The employment index bounced from the June reading, rising from 51.7 to 53.1.

Some firms said they had hired more staff in line with earlier planning, with higher volumes of new business putting pressure on capacity. The need for more people was however balanced against strict cost management.

Climbing oil prices were among service firms' chief concerns last month. This translated into higher fuel and energy prices served to increase transportation and shipping costs.

This was the case for companies in the transport, travel, tourism and leisure sectors.