Rise in services activity reaches 20-month high

Business activity in the services sector last month recorded its biggest increase since April 2002, according to a report released yesterday.The NCB Purchasing Managers' Services Index shows that activity in the sector hit 59.5 in November.

This was the sixth month in a row that it registered above the critical no-change 50 mark.

The index takes the previous month's reading as 50. Any result above this signals growth in activity, while any reading below this benchmark means that activity has decreased.

The level of growth in November was the strongest since April 2002, when the index rose above 60.

It was also the largest increase recorded this year, ahead of last month's outturn of 57.3.

Two key elements of the index, new business and employment, also showed growth.

New business came in at 60.3, the strongest result in this category this year, and the fastest rate of expansion since January 2001, when it also surpassed the 60 mark.

Employment reached 52.9. This was the third consecutive month of growth under this heading, and the sharpest rate of expansion since April last year, when it reached 53. NCB Stockbrokers chief economist, Mr Eunan King, described the positive results under both headings as "encouraging".

The index shows that the sector's capacity was tested for the second month this year. Outstanding business, or backlogs, rose to 52.4 after staying flat in October and recording a modest increase to 50.4 in September.

The sector also saw its margins squeezed during last month. Costs rose to 59.4, driven by increased wage demands and the high price of oil.

Average prices charged by the sector slipped to 49.5. However, the increase in costs was slower than the 61.4 recorded in October. At the same time the fall in prices charged was not as sharp as the 47.7 recorded under this heading during the same month.

Optimism remained strong in the services sector last month. Business confidence hit 76.9 in November, the same level as October. This made both the most buoyant months for business expectations so far in 2003. The survey participants' response was partly based on the expectation that world conditions would improve.

The index is based on a survey of purchasing managers working in a panel of 600 companies operating at all levels in the private sector services economy except the wholesale and retail businesses.