Sunday 18 August 2019

Surge in rate of job creation in services sector as Europe lags

Photo: Bloomberg News
Photo: Bloomberg News

Colm Kelpie

The rate of job creation in Ireland's services sector surged to its fastest level so far this year, although the overall rate of expansion in the sector eased.

Business sentiment remain strongly positive, with companies predicting that new orders would continue to increase over the coming year, leading to further growth in activity, according to the latest Purchasing Managers' Index for the sector.

Separate data showed that Eurozone business growth remained tepid last month, with the European Central Bank's massive stimulus programme having little apparent impact on economic activity or price pressure.

Philip O'Sullivan, economist with specialist bank Investec, said most services sector firms here are bullish about the future. "While noting that the risks have increased in recent months, we share panellists' view of favourable prospects for the Irish services sector," he said.

The seasonally adjusted business activity index dipped to 60.1 in October, from 62.4 in September. Although this signalled the weakest expansion in activity since February of last year, the rate of growth remained elevated as higher new business continued to lead to rising output.

Anything above 50 signals expansion, while below that means contraction.

The rate of job creation in the sector picked up to a ten month high, with the latest rise in employment among the strongest in the survey's history.

Staffing levels have now increased in each of the past 38 months.

Elsewhere, Eurozone business growth remained tepid last month.

"The final PMI data confirm the steady but still somewhat lacklustre economic growth recorded in the euro area at the start of the fourth quarter," said Chris Williamson, economist with financial information firm Markit.

The ECB has injected €60bn a month of new money through its bond-buying programme since March to support growth and inflation in the 19-country currency area and has hinted it may beef up the program at its next meeting in December.

Worryingly for ECB policymakers, who target an inflation rate of just below 2pc, the survey showed firms returned to price cutting last month. The composite output price index fell to 49.6 from September's 50.

Prices in the Eurozone were flat year-on-year in October, an official first estimate showed, maintaining pressure on the ECB to further loosen monetary policy.

(Additional reporting Reuters)

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