Sunday 21 January 2018

Activity surges in both services and construction sectors

Strength of sterling may have helped Irish exporters in gaining more business in the UK
Strength of sterling may have helped Irish exporters in gaining more business in the UK

Colm Kelpie and Peter Flanagan

Business activity in Ireland's services sector surged last month at the fastest pace in nine years.

The rate of new business growth also rose last month, boosting job creation, according to the latest Purchasing Managers' Index for the sector.

Stronger market conditions and good pipelines of new work led to further optimism that activity will increase over the coming year.

But the level of confidence eased to the lowest level in June in three months.

Philip O'Sullivan, economist with specialist bank Investec, said June saw the strongest rise in activity since September 2006.

"Activity has now risen in each of the past 35 months, while nearly five times as many panellists have reported a rise in activity against the number that are experiencing a decline," Mr O'Sullivan said.

The seasonally adjusted Business Activity Index rose last month to 63.3 from 61.4 in May.

As was the case with activity, new business increased at a faster pace in June.

Moreover, the rate of expansion has now quickened for three consecutive months and the latest rise was the sharpest in the year-to-date. New export business, however, increased at a weaker pace than in May.

But it was still stronger than the series average.

The recent weakness of the euro against sterling reportedly helped firms to secure new business in the UK.

Companies in the service sector tried to alleviate the pressures of the increased work by taking on new staff. Some firms reportedly linked job creation to anticipated growth of workloads over the coming months.

Mr O'Sullivan said optimism among firms, although it has softened, remains strong. "Given the improving signs around both the key export markets for services firms based here and the domestic economy, we believe that this optimism is well-founded," he said.

Meanwhile, Eurozone business activity expanded at its fastest pace in four years last month as the European Central Bank's stimulus package more than offset fears Greece could crash out of the currency union.

The final composite PMI for June, which combines manufacturing and services activity and is seen as a good guide to growth, came in at 54.2, just above a preliminary reading of 54.1 and well ahead of May's 53.6 reading.

That was its highest reading since May 2011. The index has now been above the 50 mark that separates growth from contraction for two years.

"Despite the escalation of the Greek crisis in the second half of the month, the final PMI for June came in slightly above the 'flash' estimate, suggesting the turmoil has so far had little discernible impact on the real economy," said Chris Williamson, chief economist with financial information firm Markit.

But companies are continuing to cut prices to drum up trade.

Elsewhere, a new report has claimed the construction sector is improving rapidly, but construction costs are increasing almost as quickly.

The report from the consultancy Turner & Townsend found the sector now accounts for as much as 7.5pc of Gross National Product, although that is still well below the long run average of 12pc.

The report shows that as the sector improves, costs are increasing sharply. They rose by 5pc last year - the seventh fastest out of 35 cities monitored by Turner & Townsend. In Dublin construction costs about €2,100 per sq m.

Irish Independent

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