Growth in services sector slows for second month

The growth in business activity within the country’s services-related industries slowed for the second consecutive month in March, according to fresh data published yesterday.

While the services sector continued to grow in March — as noted by the latest edition of the monthly Services PMI (purchasing managers’ index) from NCB Stockbrokers — it remains highly dependent on new export business, which expanded for the 20th consecutive month in March.

The latest PMI for the sector showed a reading of 52.3 points — comfortably above the neutral 50-point mark, which separates a sector in decline from one in growth mode; but down from 53.6 points in February and 56.8 points in January.

That said, the January reading marked the highest measure for the index for nearly five and half years; dating back to Aug 2007.

Despite March’s slowdown, the latest index remained very positive over most of the key growth metrics — new business, employment levels, general business activity and new export business all on the rise.

However, confidence amongst respondent firms dipped slightly, but “remained solid”.

“In all, the key positive from this report is the continued strength in new export business. Services exports were an important contributor to Irish economic growth last year, with total export growth of 2.9% driven entirely by strength in the services sector,” commented Philip O’Sullivan, chief economist with NCB Stockbrokers.

Mr O’Sullivan, however, noted that the pricing environment facing services sector firm remains “very difficult”; with higher fuel costs continuing to push up input prices as competitive pressures weigh on average prices charged.

“The net effect,” he added, “is that profitability deteriorated again, during the month”.