Services sector continues to expand
The country’s services sector is continuing to expand in the early part of the year with strong growth across all segments.
The domestic economy helped drive the sector’s growth last month while improving client confidence also translated into new orders for businesses.
The service sector experienced its 31st consecutive month of growth in February as the Investec Services Purchasing Managers’ Index headline figure climbed to 61.4, down slightly from 62.5 in January but representative of strong growth nonetheless.
Investec chief economist, Philip O’Sullivan credited domestic demand and improving confidence levels with driving last month’s growth but warned of falling exports.
“It would appear that the domestic economy was a key driver of growth in February. The New Business Index remained in buoyant territory with respondents indicating that improved client confidence had helped them to secure new contracts.
“The rate of increases implied by the new export index, however, slowed to the weakest pace since May 2013, despite ongoing demand from the UK,” said Mr O’Sullivan.
The strong growth was good news for jobseekers as staffing levels increased during February. The rate of job creation quickened slightly and was substantial with the rise in employment sharper than the series average.
Higher new orders allied with efforts to make headway in backlogs drove employment growth with financial services companies in particular taking on new workers at a strong rate.
Work remains to be done to clear backlogs though as they rose again in February —the 21st consecutive increase. This was most pronounced with financial firms where the rate of accumulation quickened to the fastest since last October.
Labour costs are becoming more of a worry too, however, which along with the weakness of the euro against sterling is driving up overall costs.
Falling fuel costs were not sufficient to offset these increases but output prices increased to mitigate the impact somewhat.
“Notwithstanding the softening of a number of the indices within the PMI survey, Irish services firms remain upbeat about their future prospects, with the forward looking confidence index improving to a three month high in February.
“Once again it stands close to the 10-year high that was posted in February 2014, with three-fifths of panellists expecting to see an increase in activity over the coming year and fewer than one in twenty expecting to see a decrease,” Mr O’Sullivan added.
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