Services sector growth dips slightly in August

New business helped drive growth and employment in the Irish services sector last month but expansion slowed on July, a survey released yesterday shows.

The NCB Purchasing Managers' Index (PMI) for the services sector shows that overall activity in the sector hit 62 during August.

The index is compiled by NTC Research and is based on a survey of 600 private sector companies. Any result above 50 indicates growth, while any return below that figure signals a contraction.

August's rate of growth in services was only slightly below the 62.3 recorded in July.

The companies surveyed said the increased activity chiefly resulted from new business.

New business itself registered 61.2 on the scale, down almost a point from July's result of 62.1.

Panel firms said that growth included the introduction of new products in many areas, which drove growth in services like sales and advertising.

Employment dipped to 55.2 last month from 56.7 in July. Jobs in the sector have grown every month for the last two years.

The survey states that the latest round of recruitment included workers hired to satisfy growth in demand, and sales and marketing staff taken on to help win new business.

Commenting on the results, Eunan King, chief economist with NCB, said that conditions in the sector remained buoyant, with firms remarking on healthy demand supported by marketing campaigns and expanded sales teams.

"Confidence to invest appears strong, supported by a higher volume of inquiries and successful tenders for project work," he said.

Indices for the euro zone and UK showed service sector growth slowing in August, as high oil prices pushed up costs.

However, improved domestic demand helped Germany put in its best performance in 19 months.

At 54.6, the German index hit its highest level since January 2004, as improved domestic demand enabled companies to increase staffing levels for the first time in almost three-and- a-half years.

The services PMIs highlighted a growing divergence between euro-zone countries - the sector shrank in Italy, stagnated in Spain and grew at a slower, albeit still robust pace in France.

"Without Germany seeing its improvement in growth, we would have seen a much stronger downturn," said Chris Williamson, chief economist at NTC Research, which compiles the European surveys. - (Additional reporting by Reuters)