Services 'driving growth' as sector hits 6-year high
IRELAND'S services sector enjoyed its strongest rise in new business in six years, new data shows.
After slowing in September, the rate of growth quickened again in October.
Activity has now risen in 15 successive months, with companies linking the latest expansion to improved demand from both new and existing clients, according to the latest Purchasing Managers' Index from specialist bank Investec.
The headline PMI index increased to 60.1 in October, from 56.8 the previous month.
The reading comes on the back of strong manufacturing data this week, which showed the manufacturing sector expanded at the fastest pace of any eurozone country last month.
Investec economist Philip O'Sullivan said growth looks set to continue.
"The sector has now recorded growth for 15 successive months, while the more forward-looking components of the Services PMI suggest no pause in this sequence of expansion is likely to materialise for quite some time," Mr O'Sullivan said.
It comes as the European Commission scaled back its growth forecasts for the Irish economy. It now sees growth of 0.3pc this year and 1.7pc next year. The latter is more conservative than the 2pc projected by the Department of Finance.
In May the Commission had forecast growth of 1.1pc this year and 2.2pc next year.
The services sector includes hotels, restaurants, transport, storage, post and telecommunications and renting.
Signs of improving economic conditions at home and in key export markets boosted optimism among service providers last month, with sentiment strengthening to its highest level since February of 2007.
The rate of growth in new business also accelerated and was the fastest since March 2007.
Greater customer demand was the main factor behind the rise, although competitive pricing also helped boost sales.
New export orders increased strongly with the UK highlighted as the key source of rising new orders.
Improved demand and business expansion plans led companies to take on extra staff for the 14th month running.
The rate of job creation remained sharp, despite easing slightly from the previous month, according to the report.
And the positive news wasn't just confined to Ireland. The services sector in the UK saw activity expanding at its fastest pace in 16 years as levels of incoming new business rose at a survey record rate, according to a similar PMI survey.
The headline index reached a level of 62.5 in October, an improvement on September's figure of 60.3.
It represented the sharpest rise in activity signalled by the survey since May 1997.
Chris Williamson, chief economist at financial information firm Markit, which compiled the survey, said the buoyant data would likely encourage the Bank of England to raise its economic forecasts.
"Manufacturing, services and construction all continued to see very strong rates of expansion, pointing to an ongoing broad-based upturn," Mr Williamson said.
"However, it is the services sector which, due to its sheer size, is the major driving force behind economic growth at the moment."