Service sector growth remains strong, index shows

GROWTH in the services sector of the economy held up well in April, the latest PMI survey has revealed.

Services account for about 65% of the economy and continued to grow for the 11th successive month to the end of April.

Data from the NCB Purchasing Managers Index shows it rose to 58.7, its highest since December 2003.

Results for April showed business activity remained strong, with the pace of the pick-up increasing as greater buoyancy fed through to the market.

Firms said they were doing more business, some of which was boosted by marketing and promotion.

Overall, those surveyed said the better outturn bore out earlier reports of improving economic sentiment and a recovery in spending.

Some of the boom was due to price discounting which some firms found was necessary to attract customers.

Employment was up for the eighth consecutive month, with respondents saying growth accelerated as capacity shortages became an issue for some.

New business continues to be the driving force, resulting in firms hiring more staff to keep pace with the growing sectoral strength.

Eunan King, senior economist at NCB, said: “The data for April show a broad range of strength in the service sector of the economy.

The rise in incoming new business was particularly impressive. It was accompanied by an acceleration in the backlog of work and in employment. Margins remain under pressure as input costs continue to grow and charges decline.”

Mr King said the index highlights the “basic robustness in the Irish economy, reflected by continuing employment growth through the years of lower growth”.

With the US economy showing “robust growth”, Mr King said the impact was coming through in the Irish economy.

He said the trend growth of 5-6% in GDP terms will continue in the medium term. Services account for between 60% and 65% of the economy and any uptick there has a big impact on growth, he said. This latest positive result from services was borne out in yesterday’s Exchequer returns, which show the country’s finances are in a healthy state, he said.