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Confidence grows in service sector

CONFIDENCE in the future of the service sector in Ireland is the highest in the EU, with sentiment in manufacturing also starting to pick up.

However, job creation across the sectors would be modest, the KPMG survey warned.

The poll for the next year shows sentiment in Irish business activity running at +47.9.

As well as being the highest in the EU, the findings for Ireland are also well ahead of the EU average (+33.6) and the global average (+43.9).

The latest survey results, compiled by research firm Markit Economics for KPMG, suggest that overall expectations in Irish business are becoming increasingly positive.

Sales and new business in both the service and manufacturing sectors are expected to grow over the next 12 months, KPMG said.

The survey shows that services sector profits are set to grow more quickly than the rest of the EU. Marginal increases in employment are also expected in both sectors.

Irish service sector findings:

* Revenues for the sector are registering at +32.4, up from +17.3 in the last survey (February 2010).

* New business is at +48.3, up substantially from the previous figure of +33.1.
* Profits, at a figure of +26.5 are up from +11.5and are forecast to grow faster than the rest of EU.

* Employment expectations have increased to +16.8 from +6.3 – the strongest figure since October 2007.

* Though input costs are predicted to rise the increase should be the weakest of all the monitored EU nations.

* Charges are forecast to keep falling, extending the current sequence of negative expectations to five surveys.

* Capital expenditure is predicted to decrease again over the coming year, albeit to the least extentin the current six-survey sequence of decline.

* Manufacturing sentiment at +45.2, in line with the EU average.

The outlook here is also ahead of a number of other economies including Japan, France and China but lags the US, Britain, Germany and Poland.

The outlook for new business for manufacturers stands at +38.9, up from +34.3, the highest level of optimism in eight survey periods, said KPMG.

Higher profits are predicted for the third consecutive survey, with the figure of +21.4 in line with those across the EU.

And for the first time since July 2007, Irish manufacturers expect to increase employment over the next 12 months, with a marginal up tick of +2.4.

"Irish business has responded effectively to the challenges of recession by taking difficult steps over the last 24 months and they are now poised to benefit," said David Kennedy, head of advisory at KPMG.