Optimism in services sector at decade high

The stock exchange in Frankfurt

Colm Kelpie

THE services sector in Ireland has experienced growth for 19 consecutive months, with optimism among businesses strengthening to its highest in more than a decade in February, new data shows.

Further sharp rises in activity and new business were recorded last month, although the rate of expansion eased.

Higher workloads encouraged companies to take on extra staff at the strongest pace since October 2006, according to the latest Purchasing Managers' Index for the sector.

And European services output expanded faster than initially estimated in February as Germany boosted growth to the strongest in almost three years.

Philip O'Sullivan, economist with Investec, said the Irish data shows firms are very confident about the future.

"Optimism among Irish services companies strengthened to the highest level recorded by the series since January 2004.

"Almost 65pc of panellists forecast activity to be higher in 12 months' time, compared with only 5pc who predict a fall," he said.

The seasonally adjusted business activity index pointed to a further sharp increase in business activity, posting a reading of 57.5. This is down from 61.5 the previous month.

Anything above 50 signals expansion while anything below that means contraction. PMIs are regarded as important forward-looking indicators of the health of an economy and are therefore closely watched by analysts and experts.


Panellists also reported that rising salary cost payments was the main factor leading input costs to increase in February.

Job creation quickened to the strongest pace since October 2006, with rising new business credited for the increase.

The index for the euro region rose to 52.6.