Rising exports boost confidence in prospects of recovery

IRELANDS SERVICES sector shrank and shed jobs at a slightly faster pace last month but rising exports boosted confidence that recovery was near, according to the latest NCB Purchasing Managers’ Index (PMI).

The index fell to 45.5 from 46.7 in August but a pick-up in key sub-indices pointed to the prospect of recovery from late 2009.

“It is encouraging to note that not only is confidence improving but so too is new export business which grew for the first time since December 2007,” said Brian Devine, economist at NCB Stockbrokers.

The sub-index measuring confidence rose to its strongest since March 2008 while the new export orders component rose to 54.0 from 49.9 in August, ending a 20-month sequence of decline.

Meanwhile, the euro zones services economy returned to growth for the first time in 16 months last month.

Markits final Eurozone Services Purchasing Managers’ Index of 2,000 companies rose to 50.9 in September from 49.9 in August, its highest since April 2008. This marks the first time it has passed the 50 mark that separates growth from contraction since May 2008.

The euro zones performance was helped by a leap from French services into clear growth territory at 54.8 from 51.3 the previous month. Germany too held above the 50 point, although the index retreated slightly from its August level, while both Italy and Spain made progress towards recovery.

A rise in both the services and manufacturing PMI, the latter released last week, took the Composite PMI up to 51.1 from 50.4 in August. That was the highest level since May last year. In yet more positive news, a separate report showed that Britain’s service sector expanded at its fastest pace for two years in September, with firms more optimistic about the next 12 months than at any time since April 2007.

The Markit data indicates that Britains economy returned to modest growth in the third quarter, but spare capacity in the sector and weaker performance in similar manufacturing and construction surveys meant the recovery was likely to be weak.

The headline PMI number rose to 55.3 in September from Augusts 54.1, its fifth successive month above the 50-level. In addition, the PMI expectations index rose to 75.0 from 72.3, with firms citing a better economic backdrop, more new business enquiries and plans to increase advertising. – (Additional reporting: Reuters)