Irish Economy: Services activity rose
sharply again in November with the seasonally adjusted Business Activity Index , based on a single question asking
respondents to report on the actual change in business activity at their
companies compared to one month ago - - remained at 56.1 in November, equal with
the five-year high seen in October. Respondents indicated that rising new orders
had led to the latest sharp expansion in activity. Caution is required here
because the tax strategies of the big US services firms in Ireland artifically
boost output in Ireland.
There has been a big rise in headline
services exports but much of the related economy activity is located elsewhere.
For example Google books almost half of its global revenues in Ireland.
Forecasts of improvements in economic conditions led
companies to expect activity to rise over the coming year. The launch of new
products and increased marketing activities were also predicted to support
growth of output.
Another substantial rise in new business was registered in
November, with the rate of expansion only slightly weaker than in the previous
month. New orders have now increased in five of the past six months. New
business from abroad also rose sharply during November, extending the current
sequence of growth to 16 months. Some panellists reported higher new orders from
A further strong rise in new business led to an accumulation
of backlogs of work. The latest increase was the third in as many months, and
the rate at which outstanding business rose was the fastest since March 2007.
Service providers increased their staffing levels at a solid
pace in November, and one that was the sharpest in 63 months. Panellists linked
the latest rise in employment to higher workloads and the expectation of further
improvements in coming months.
The rate of input price inflation slowed for the second
successive month in November, and was weaker than the series average. Where
input costs did increase, this was linked to higher prices for fuel and rising
Output prices decreased again in November, with companies
reporting the need to offer discounts in order to support growth of new
business. Competitive pressures were also mentioned by respondents. The rate of
decline in prices charged was solid, and only slightly weaker than in October.
Philip O’Sullivan, chief economist at NCB Stockbrokers said: "The latest NCB Services PMI release, covering the month of November,
provides much to be cheerful about. The headline Business Activity (56.1) index
is unchanged from the five-year high recorded in the previous month. Companies
in the services sector are upbeat about their prospects, with the
'Expected Levels in 12 Months' Time' reading at its highest level in eight
"New Business has been in positive
territory for four months now. This has been partly driven by New Export
Business, continuing an unbroken expansionary trend that stretches back to
August 2011, and also by new client wins domestically. This improved demand has
helped bolster Employment (which recorded a third successive monthly increase
and the sharpest rate of expansion in 63 months) within the sector.
"The Services PMI surveys four sectors -
Business Services, Financial Services, TMT and Transport & Leisure. All of these
reported growth in business activity during the month, save for Transport &
Leisure. This is something of a surprise given the robust growth recorded in
that segment in October, however, given that the 'Expected Levels in 12 Months'
Time' reading for Transport & Leisure was little changed relative to the
previous month this may be just a blip as opposed to the start of a new trend.
"For some time now we have noted the
divergence between Input Costs (rising) and Output Prices (falling) for the
sector. This suggests that discounting is continuing to play a role in
supporting growth for Services firms, leading to some companies sacrificing
margins in order to drive top-line growth.
"We described the results of last month's NCB Services PMI
release as "an impressive performance given the broader economic backdrop". With
the overall picture little changed since then, we would echo that description
for today's release."
The NCB Republic of Ireland Services PMI
(Purchasing Managers’ Index) is produced by Markit. The report features original
survey data collected from a representative panel of around 300 companies based
in the Republic of Ireland services sector.
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