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Service industry recovery lags behind rest of world

IRELAND'S services sector saw rare evidence of growth in January, but recovery remains fragile with a slight decline in the numbers at work, according to the latest Services Purchasing Managers (PMI) Index.

The improvement here lagged the rest of the world, which saw stronger evidence of recovery.

Manufacturing output increased steadily throughout last year but the wider ranging services sector, which includes everything from banking, media and hospitality, remained weak, according to the research from NCB Stockbrokers.

The services sector is more dependent on demand in the home economy than Ireland's export-focused manufacturing sector.

Services PMI bounced to 53.9 in January from 47.4 the previous month. PMI indices measure activity on a scale either side of 50. A number below 50 represents a decline, while a number above represents an increase. It means the 53.9 number reflects fairly solid growth.

The latest figures were boosted by the improvement in weather conditions after a tough December.

There is good news however. Business confidence rose to its highest level since September last year, the survey showed.

The measure of new business among exporting service providers rose to 55.1 in January from 49.7 the previous month. However, new business fell across the domestic and export sector in January, dragged down by the lack of domestic demand.

Without significant growth the job situation continues to be bleak. Job losses in the services sector have slowed, but January's data shows a continued, if slight, decline in the numbers at work.


Services sector employment has now fallen in each of the past 35 months.

"Once again, this shows the two-tiered nature of the Irish economy -- buoyant exports, depressed domestic demand," said Brian Devine, economist at NCB Stockbrokers.

Domestic demand remains subdued across Europe, even as many manufacturing industries boom. European retail sales slipped 0.6pc in December from November, when they dropped 0.3pc, the European Union's statistics office in Luxembourg said yesterday. Economists had forecast a 0.5pc increase. Sales dropped 0.9pc from a year earlier.

In the UK services sector activity hit its highest level since May, according to the Markit/CIPS Business Activity Index. The index rose from 49.7 to 54.5 compared to an expected 51.2.

The global JP Morgan Services PMI index hit 58.2 in January, from 56.9 in December. The measure of business activity in the world's major economies, including the eurozone, has now been above the 50 mark for 18 months.

Irish Independent