Services industry activity increases

CONFIDENCE levels among services industry companies remains strong, with new figures showing that business activity in the sector increased at its fastest pace for nearly three years in June.

The latest monthly services sector Purchasing Managers’ Index (PMI) from NCB Stockbrokers shows that activity amongst relevant Irish firms increased for the third month in a row in June and achieved its fastest increase since October 2007.

The general improvement in economic conditions also boosted confidence levels, with most firms remaining positive over their prospects for the coming 12 months.

Rises in new business orders, including export business, was also a feature of the latest edition of the index, whose measure went up from 52.4 in May to 55.4 for June. Any reading above the neutral 50 point mark indicates industry growth.

New export business actually hit its highest level for 34 months.

The latest survey also found, however, that employment levels at service providers continued to fall in June. However, while that monthly trend has continued for more than two years, last month’s reading showed that the actual pace of job cuts eased for the second consecutive month and is now at its weakest level since April of 2008.

“The services sector is the key sector in terms of employment creation and, as such, the rise in output in this sector is encouraging. It will, however, take some time before the rise in output filters through to net job creation.

“The employment component of the PMI continues to signal that more firms are shedding jobs than adding jobs. We expect the unemployment rate to average 13.7% in 2010 and to remain at the elevated level of 12.6% in 2011,” NCB said.

Furthermore, NCB is not expecting any interest rate change from the European Central Bank (ECB) when it next meets on Thursday.

“The Irish recovery is highly dependent on external factors. We believe that the ECB should have lowered its rate to zero a long time ago and have not changed our position on this, but it is unlikely to budge from its positionat this Thursday’s meeting.

Nonetheless, the ECB rate is likely to remain at its current level throughout 2011 and remain extremely low for the foreseeable future.

“Furthermore, Ireland will benefit from the weakening of the euro against in particular sterling, but also the dollar,” it added.


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