Service providers facing escalating costs

Costs facing Irish service providers continued to accelerate last month at the strongest rate since May 2001, according to the NCB Purchasing Managers Index (PMI) for September, published yesterday.

High oil prices led to a rise in the cost of derivative items such as fuel and energy. In response to higher costs, service providers raised their average charges but the rate of increase in output prices remained well below the equivalent measure for input costs.

Overall, business across the services sector here remained buoyant in September with the business activity index posting a 61.8 level. While business growth showed a slight easing from August, when it was measured at 62.0 by the index; it has been above the neutral 50.0 level for 28 consecutive months.

Growth has partly been attributed to the success of fresh marketing and promotional activities on behalf of companies. Employment across the sector rose as companies took on additional staff to handle larger volumes of new business and increased levels of repeat business.

Employment growth was measured by the index at 55.7 for September, slightly up from August’s 55.2 level.

“Confidence remains high and new business is expanding strongly, if at a marginally diminished rate from August. Employment growth accelerated marginally also. Even though a high backlog of work remains, overall the picture is optimistic. Activity in the service sector continued to grow at about the same strong pace as seen in the previous few months,” said Eunan King, senior economist at NCB Stockbrokers.

The PMI survey covers all private sector services in Ireland, excluding retail and wholesale. The information is taken from surveying 600 privately owned Irish services companies.

This month’s index signals a high level of confidence amongst service providers here with regard to future business activity. More than half of those companies surveyed said they expected business activity to improve in the coming year.

Optimism is linked to planned investment, hopes of increased demand from overseas and a strengthening economy.