Service sector expands rapidly

THE service sector of the Irish economy is expanding rapidly, in sharp contrast to the manufacturing sector, according to the NCB Purchasing Managers’ Service Index.

However, despite the improvement in the services sector and the slowdown in the rate of decline of the manufacturing industry, employers in all sectors are still shedding jobs, the NCB Purchasing Managers’ Index indicates.

August PMI (services) data shows that strong growth in the overall business activity rose sharply for the third successive month hitting its highest level since last November at 53.5 in August.

Keeping well above the critical break-even point of 50, NCB Stockbrokers said yesterday. Figures below 50 indicate a decline.

In the manufacturing sector, reported on Monday, the index of business conditions in the manufacturing economy in August rose to 48.1 in August from 45.8 in July, indicating a slowdown in the rate of decline.

NCB chief economist Dermot O’Brien commenting on the stats compiled by NTC Research said: “After three months of solid gains and with the overall activity index at its best level since November 2002, the rebound in the services sector is now beyond doubt. Taken together with the improvement in manufacturing, signalled earlier this week by the purchasing managers’ survey for the sector, the economic outlook has brightened considerably.”

Despite the improvement in business activity the NCT data recorded the 14th successive monthly fall in net staffing levels. The survey indicates that the rate of decline in job numbers in the sector has slowed but job losses are continuing.

“Service firms reported that measures to improve productivity during the recent period of weak demand and tight margins had allowed them the scope to continue cutting staff numbers, despite the rise in new business,” the survey authors said.

Reflecting the fall in the Consumer Price Index the survey found average services charges fell for the fifth consecutive month.