Sharp activity rise in services sector signals confidence boost
ACTIVITY in the Irish services sector rose at the sharpest rate in almost seven years last month. The latest Purchasing Managers' Index (PMI) for the sector shows the rate of job growth also accelerated.
PMIs are important because they are regarded as reliable forward-looking indicators of the health of an economy and are therefore closely watched by market analysts and investors.
The latest report shows that the rate of expansion in new business quickened for the third month running and was the sharpest since February 2007.
Philip O'Sullivan, economist with specialist bank Investec, said the report shows a strong finish to the year for the sector.
“Within the data we see much to be optimistic about. The pace of growth in new business quickened for a third successive month during December, with respondents citing strengthening economic conditions and improved client confidence,” he said.
The seasonally adjusted business index rose to 61.8 in December from 57.1 in November. Anything above 50 indicates expansion while below that signals contraction.
The services PMI has now posted above-50 readings for 17 consecutive months.
Respondents noted strengthening economic conditions and improved confidence.
New business from abroad continued to rise, with the UK highlighted as the main source. The rate of growth was substantial and the fastest in 11 months. The rate of job creation picked up to a sharp pace that was the strongest in five months. Employment has now risen in 16 successive months.
Meanwhile, eurozone composite PMIs in both services and manufacturing showed output growth throughout the second half of last year, despite recovery remaining fragile.
At a three-month high of 52.1 in December, up from 51.7 in November, the latest Eurozone PMI Composite Index rose to its second highest level during the past two-and-a-half years.
Manufacturing continued to lead the recovery in December. Growth of production accelerated to its fastest since May 2011, as new orders improved.