Service sector grows at fastest rate since 2007
Biggest increases in technology, media and telecoms
THE vital services sector recorded growth for the second month in a row last month, according to the latest survey of purchasing managers.
The pace of growth quickened compared with April. The Purchasing Managers Index (PMI) rose to 52.4 from 51 in April, where a reading over 50 represents growth.
Although fairly modest, this was the fastest growth in services recorded in the NCB Stockbrokers/Markit survey since December 2007.
The biggest increase in activity was recorded in the technology, media and telecoms sector with a reading of 58.2. Only transport and leisure recorded a decline last month. NCB said the weak euro should be a boost for tourism in coming months.
Service exports, on which much of the hopes for the economy's future rest, continued to rise markedly during May, according to the responses of managers, and at a faster pace than new orders overall.
Export orders have increased in each of the past nine months. The export order index for the financial services sector rose to a vigorous 67.6 -- the strongest in nearly three years.
Unlike manufacturing, where the May survey recorded a rise in employment, jobs continue to be lost in services. The services sector is far more important for employment than industry, which accounts for just 13pc of employment.
"The weakness in the services sector labour market was evident in Wednesday's Live Register figure," said Brian Devine, chief economist at NCB.
"We expected the unemployment rate to tick up during the year, despite it having been stable at 13.4pc for four months, and to average 13.7pc for 2010. The cyclical recovery is under way as evidenced by the PMIs, but the unemployment rate will continue to rise, given the lack of job creation in 2010," he said.
The steepest reduction in staffing levels was recorded in the business services sector, where employment decreased for the 27th consecutive month.
Business sentiment increased to its highest in more than two-and-a-half years with managers citing strengthening economic conditions and improving client confidence,
The euro-area government debt worries, which are weighing on financial markets, do not appear to be affecting the mood in the real economy, Mr Devine said.
Despite the improved conditions, service firms overall continued to cut salaries last month, according to managers.
This went along with a further cut in the prices charged for services as companies try to secure new business in the face of intense competition.
A survey in the euro area showed the index for services activity rose to 56.2 in May from 55.6 in April, but manufacturing activity declined to 55.8 from 57.6. Final estimates for April increased the rate of growth that month.
The US service sector expanded for a fifth month, a survey by the Institute for Supply Management found. The pace of growth held steady, with a reading of 55.4, for the third month in a row.