Services growth hit by oil hikes - NCB index

Companies in the Irish services sector won large volumes of new business in September but a survey has indicated that growth …

Companies in the Irish services sector won large volumes of new business in September but a survey has indicated that growth was slower than in July and August, as high oil prices upped pressure on business costs.

The growth in Irish business activity reported in the latest NCB Purchasing Managers' Services Index mirrored positive conditions in the euro zone generally.

But despite the growth in the domestic market, NCB said services sector inflation continued to grow in September and was at its strongest since May 2001.

"High oil prices reportedly drove up the cost of derivative items, principally fuel and in some cases energy," said NCB. "Growth in staff salaries was also cited."

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The brokerage's monthly survey of 600 Irish services companies found that activity was stepped up mainly to satisfy improved levels of new business.

Other factors included the expansion of sales operations, marketing drives and the promotion of new products.

With confidence about future activity high and services sector employment on the rise, the companies surveyed by NCB said they had recruited additional workers to handle the new business.

Activity in the services sector was scored 61.8 on NCB's seasonally adjusted composite index of business activity.

A score above 50 suggests activity is growing, while a score below 50 suggests activity is contracting. The score in August was 62 and the score in July was 62.3.

"Confidence remains high, new business is expanding strongly, if at a marginally diminished rate from August, and employment growth accelerated marginally," said NCB senior economist, Eunan King.

"Backlogs of work remain high. Overall, an optimistic picture."

Similar research in the euro zone suggested that service sector activity grew rapidly in September.

This followed a comparable survey of the manufacturing sector in Europe and the US earlier this week which showed an unexpected rise in activity.

The survey by NTC Research, to which NCB is affiliated, showed that growth in the euro zone services sector beat forecasts with a reading of 54.7 - a 14-month high - in September.

Analysts said the score was noteworthy to the extent that the zone is forecast to grow by little more than 1 per cent this year.

(Additional reporting: Reuters)