Monday 19 August 2019

Services industry buoyed by export demand

AIB chief economist Oliver Mangan
AIB chief economist Oliver Mangan
Ellie Donnelly

Ellie Donnelly

Activity in the services sector increased last month, in contrast to manufacturing where productivity fell to a six-year low.

It marks the second month in a row where services and factory output have diverged in Ireland.

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The better services performance was driven by stronger demand for exports, which expanded at the fastest pace in five months, according to AIB's purchasing managers index (PMI) for June.

The sector - which spans industries from bars and hotels to banking - is the country's most important.

Financial services posted the fastest gains. The headline PMI was 56.9 in June, down slightly on the May figure of 57. Any reading over 50 records growth, while numbers below 50 track a contraction.

Meanwhile, in the UK, construction output plummeted at its steepest rate since 2009, as Brexit uncertainty and weaker demand hit all major areas of the industry.

The Markit/CIPS UK construction purchasing PMI recorded a reading of 43.1 for June, down from 48.6 in May.

Here, AIB chief economist Oliver Mangan said Irish services data suggests the economy is continuing to expand at a good pace, driven by strong growth in the large services sector.

Employment levels in the services sector expanded at the strongest pace in three months. Businesses said they had to add to their staff levels in order to cope with greater customer demand.

On the price front, the rate of input cost inflation dipped slightly from May, but remained steep. Higher fuel, staffing and utility costs were mentioned by panellists.

The rate of output charge inflation also softened compared with May.

Looking ahead, sentiment among Irish service providers regarding future activity was broadly unchanged month-on-month.

Around two in five businesses predicted a rise in output over the coming year.

This optimism was based on forecasts of stronger customer demand, company expansion efforts and business investment plans.

Irish Independent

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