Services sector inches closer to return to growth

THE services sector inched closer to a return to growth for the first time in over two years in March, but declining new orders held companies back, according to a survey.

The NCB Purchasing Managers’ Index rose to 49.6 in March from 48.8 in February, reaching its highest level since January 2008 but failing to follow the manufacturing sector in breaking the 50 mark that separates growth from contraction.

Markit, which compiles the data, said the continued deterioration largely reflected lower new business, which fell again in March because of the fragile economic conditions and intense competition.

“The only disappointing thing about the March PMI was that new orders continued to fall, the drag being caused by domestic demand,” said Brian Devine of NCB Stockbrokers.

The sub-index measuring new business rose to 48.2 from 47.7 in February, trailing levels closer to 50 it reached in October and December last year.

“New export orders on the other hand have now grown in each of the past seven months, which is encouraging and when this is combined with the weakness in domestic demand helps explain the huge narrowing of the services trade deficit,” Mr Devine added.

March’s PMI survey measuring Ireland’s manufacturing sector showed growth for the first time in 28 months. And strengthening demand prompted analysts to suggest the domestic market may have bottomed.

And the eurozone’s dominant service sector grew at its fastest pace in over two years in March, with all four big economies expanding as firms became more optimistic about the year ahead.

Markit said its final Eurozone Services Purchasing Managers’ Index of around 2,000 companies, ranging from banks to hotels, jumped to 54.1 in March from 51.8 in February, revised up from a flash estimate of 53.7 released two weeks ago.

That is its highest reading since November 2007 and marks theseventh month the index has been above the 50.0 mark that divides growth from contraction.

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