Tuesday 22 January 2019

Services output moderates in February but stays in growth

The services sector experienced a moderation in growth in February (Stock image)
The services sector experienced a moderation in growth in February (Stock image)
Ellie Donnelly

Ellie Donnelly

Services output moderated slightly in February to its weakest output since November.

The headline Purchasing Managers Index (PMI) stood at 57.2 last month, down from January's 59.8 reading, according to specialist bank Investec's Services PMI index.

Any reading over 50 is deemed growth.

Despite the moderation in growth, the sector has now posted 67 successive readings above the 50 mark.

The new business component was little changed in February, pointing to a substantial pace of expansion, the index found.

Panellists reported new business wins from both domestic and export markets, with around one-in-five respondents signalled higher new export orders - the US and Europe in particular were cited as areas of strength.

Ongoing increases in client demand produced another rise in business outstanding, the fifty-seventh in as many months. This was in spite of another rise in sector employment the report found.

Meanwhile on the margin side, while the rate of input cost inflation eased to a five month low, it was still elevated in the context of historical survey data.

Panellists blamed salaries, insurance and fuel costs for the latest inflationary pressures. In response to this, Irish services companies put through further increases in average prices charged, which helped to keep the profitability index in positive territory for a 16th successive survey period.

Looking forwards, firms are very optimistic about the next 12 months, with February’s level of optimism the highest since September.

"This optimism is broad-based," Philip O’Sullivan, economist with Investec, said.

"Given the improving global economic backdrop, we think that this optimism is well-placed."

Last week, manufacturing output data for February showed that manufacturing output in Ireland moderated in February, having ended 2017 at the highest level recorded in the almost 20 years since measuring began.

Despite the moderation in growth, the manufacturing sector has now posted 57 successive readings above the 50 mark.

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