Further rise in Irish services industry sentiment

Business sentiment in the Irish services industry has increased for the third month in a row, it was announced today.

The seasonally adjusted NCB Republic of Ireland Services PMI – which is based on a single question asking respondents to report on the actual change in business activity at their companies compared to one month ago – increased for the third month running to 55.4 in June, having posted 52.4 in May.

Panellists indicated that higher activity largely reflected rising new orders, as confidence among clients improved.

As confidence among customers increased, new orders rose further during June. Consistent with the trend for activity, the rate of new business growth was the steepest since October 2007.

New orders from abroad increased at a faster pace than overall new business in June. New export orders grew sharply, and at the steepest pace in 34 months as firms sought external business.

"The rise in the services PMI to its fastest rate since October 2007 provides further evidence that the recovery in Ireland is taking hold.," said NCB Stockbroker economist Brian Devine.

"The services sector is the key sector in terms of employment creation and as such the rise in output in this sector is encouraging. It will, however, take some time before the rise in output filters through to net job creation.

"The employment component of the PMI continues to signal that more firms are shedding jobs than adding jobs."

Although a number of respondents noted that spare capacity remained at their units in June, a similar proportion indicated that higher new orders had led backlogs to accumulate. Consequently, outstanding business was broadly unchanged over the month.

Staffing levels at Irish service providers fell again during June, extending the current sequence of job shedding to twenty-eight months. However, the pace of reduction eased for the second month running to the weakest since April 2008.

Input prices decreased at the slowest pace in the current eighteen-month period of decline in June. Anecdotal evidence suggested that reduced labour costs were the key factor behind the fall.

Conversely, the relative weakness of the euro led to inflationary pressure on import costs.

For the twenty-third consecutive month in June, output prices decreased. Furthermore, the rate of decline was substantial, having accelerated for the second month running.

Panellists indicated that intense competition was the main reason for the latest fall in charges.

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