Services sector growth goes on

THE services sector saw significant growth during December, employing more people for the fourth month in a row, according to new figures released yesterday.

The monthly Purchasing Managers’ Index (PMI), published by NCB stockbrokers, showed service-related industries echoed the strong performance recorded last week by the manufacturing sector.

Overall business activity in the services sector rose for the seventh consecutive month but was marginally lower than the recent high recorded in November. Incoming new business also picked up sharply during December, as client spending improved in line with expectations of an economic recovery.

NCB’s survey also found business confidence at its highest level for almost two years. Surveyed firms said higher levels of new business and improved client sentiment would lead to greater activity in 2004.

NCB’s chief economist Dermot O’Brien said the services sector ended 2003 on a high note and welcomed the positive signals relating to business activity, employment and confidence.

Activity levels rose in most of the sectors surveyed, although activity fell in the transport and leisure sector, which NCB put down to seasonal factors.

The survey also highlighted continuing increases in costs. Services firms repeated last week’s complaints by manufacturers that input costs were higher.

Surveyed firms singled out higher energy bills as oil prices rose. Wage costs also went up as firms took on more staff to meet increasing demand. The survey suggested that some businesses benefited from lower inflation as a result of the euro’s rise against sterling and the dollar.

Equivalent figures were also released for Britain and the eurozone yesterday. The overall index for business activity in the services sector fell slightly in the eurozone after five successive monthly rises, but remained comfortably ahead of the benchmark level that separates growth from contraction.

Analysts expressed concern at the employment component of the eurozone index, which experienced a slight contraction during the month. In Britain, the monthly index also remained strong, despite a marginal fall from November. Business confidence in both Britain and the eurozone continued to improve.

In the US, the monthly services sector figures from the Institute of Supply Management disappointed the market by recording a slight fall in the headline index. Observers had expected the index to rise from last month.