Saturday 15 December 2018

Services sector off to a good start in 2018 as new business quickens

(Stock image)
(Stock image)
Ellie Donnelly

Ellie Donnelly

The services sector in Ireland has recorded a further sharp rate of expansion in business activity in January, with the pace of expansion in new business hitting a three month high.

"The rate of new order growth accelerated in January and was substantial," Philip O'Sullivan, chief economist with specialist bank Investec, said.

"The securing of new contracts, favourable economic conditions and the launch of new services all reportedly supported increases in new business."

The headline PMI for January was slightly lower at 59.8 than the 60.4 recorded in December, according to the latest Investec Services PMI Ireland report.

Increased client demand led to a further accumulation in outstanding business, extending the sequence of growth here to 56 months, and continued growth in employment, for a 65th successive month.

Meanwhile expectations of further improvements in domestic economic conditions, alongside predictions of greater foreign tourism, supported optimism that activity will continue to rise over 2018, with the forward-looking expectations index improving to a four month high.

This positive disposition is broad-based, with all four segments of the services sector that are captured by the survey – business services, financial services, travel & leisure and technology, media & communications – simultaneously posting above-50 readings for this component for a 68th successive month.

"Given the improving global backdrop, we think that Irish services firms are right to be upbeat on their future prospects," Mr O’Sullivan said.

Turning to margins, the rate of input cost inflation remained very sharp.

Fuel, insurance, labour and raw materials prices all contributed upward pressure to firms’ cost bases in January.

Nearly a fifth of services companies raised output prices last month, with the primary motive here being to protect margins in the face of the aforementioned rising costs.

Overall, helped by volume growth, the profitability index stayed in positive territory for a 15th successive survey period in January.

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