Services sector's six-year high thanks to the sun
IRELAND's services sector recorded sharp growth in new business last month, thanks largely to the good weather, with the rate of expansion the fastest in more than six years.
Companies generally expect further improvements in economic conditions over the coming year with sentiment remaining positive, according to the latest Services Purchasing Managers' Index (PMI) from specialist bank Investec and financial information company Markit.
It comes after a similar report earlier this week showed that manufacturing here expanded at its fastest pace in nine months in August.
It was a similar picture in the recession-weary eurozone, with the services sector returning to growth in the month, putting an end to an 18-month contraction. Ireland recorded the steepest rate of expansion in business activity of all the eurozone nations, according to the survey.
And UK services growth accelerated to its fastest pace since 2006.
The PMI in Ireland stood at 61.6 – up from 57.6 in July. Anything above 50 indicates expansion, while a reading lower than that means contraction. Last month marked the third successive acceleration in the rate of growth to the strongest since February 2007.
Philip O'Sullivan, Investec economist, said the good summer weather and a boost in tourism were the main reasons for the hike.
"The strength in August was broad-based with all four subsectors reporting growth in business activity on an unadjusted basis," Mr O'Sullivan said.
"New business was very robust, with both domestic and overseas markets reported to be strong."
The PMI survey is based on data compiled from monthly replies to questionnaires sent to a panel of 450 companies in the private sector.
The services sector is divided into several categories including hotels and restaurants, transport and storage, post and telecommunications, financial intermediation, and renting and business activities.
The data is used to complement the manufacturing PMI, which is carried out in a similar manner.
Those who took part in the survey highlighted increased new business from both domestic and export markets, with new business from abroad rising for the 25th successive month.
Increased employment was recorded during the month, while output prices continued to decrease amid strong competitive pressures and efforts to attract and retain clients.
The eurozone's reading of 50.7 in August for the services business activity index indicated a return to growth for the service sector in the 17-strong bloc. This was up from 49.8 in July.
In the UK, services business activity increased to 60.5 last month from 60.2 in July.
Chris Williamson, Markit chief economist, said the eurozone recovery was looking increasingly broad-based.
"Service sector companies reported the first increase in business activity for a year-and-a-half in August, which follows news from the manufacturing PMI that goods production is now growing at the fastest pace for over two years," Mr Williamson said.
"Encouragingly, domestic demand is starting to pick up within the euro area, with the region's PMI also moving into positive territory for the first time in over two years in August."