Services sector growth sparks kick-start hope for economy
A closely watched survey signalled that Ireland's services sector is growing at the fastest pace since well before the economy collapsed, boosting hopes that economic growth will gain momentum in 2013.
The NCB Purchasing Managers' Index for the services sector has now been in positive territory for six months. A separate report on industrial production also pointed to strong growth.
The services sector accounts for 70pc of the economy although that includes the public sector, which is not covered by the NCB survey.
Signs of fast growth in the services sector together with continued growth in the manufacturing sector and better-than-expected income tax payments are fuelling hopes that the economy is turning after five rocky years. Similar surveys in our largest trading partners dampened fears of recession there, suggesting the worst is over for them as well.
"I would expect that this would be the year that the economy turns," Finance Minister Michael Noonan said on Monday ahead of the publication of Exchequer figures.
Yesterday's survey of the services sector produced the highest index reading since August 2007, a year before the financial crisis took hold.
"This is a very encouraging," said Philip O'Sullivan, chief economist at NCB Stockbrokers. "We expect the recent positive trends to continue over the coming months."
Yesterday's survey suggests a sharp rise in employment, but the sub-index monitoring new export business was also in positive territory for the 18th month in a row, rising to the highest reading since records began in June 2002.
A separate survey last week showed that Irish manufacturing activity expanded for the 11th consecutive month in January, but at the slowest pace in nine months as the flow of new orders contracted for the first time in a year.
The Central Statistics Office added to the good cheer with new industrial production figures that showed production rose 2.8pc last year, although output from "home-based" industries was down 4.0pc on 2011.
There were signs of a pick-up elsewhere. In the UK, which is the biggest market for Irish-owned companies, the services sector posted its strongest figures since September, which led the sterling to rise against the dollar and the euro.
The vast US services sector expanded against last month, extending a three-year run of growth, while European business optimism hit an eight-month high, suggesting the eurozone economy was starting to recover. Still, the index for the eurozone remained below 50, suggesting that the sector is contracting although the rate of contraction is slowing.
Rising corporate confidence also helped China's services sector grow at its quickest pace in four months, providing more evidence of a gradual rebound in the world's second-largest economy.