Irish Economy 2014: Growth in the Irish service
sector picked up momentum at the end of the second quarter, with sharper rises
in activity and new business recorded. This led companies to take on extra staff
at a faster pace. Meanwhile, inflationary pressures showed signs of building,
with quicker increases in both input costs and output prices. However,
there is a Reality Check required as Philip
O'Sullivan, chief economist at Investec Ireland, suggests that today's data on
services exports will validate the PMI (purchasing managers' index) survey.
This is fairytale economics as the biggest
"exporters" are not real exporters - - Google, Microsoft and Facebook book big
chunks of their global revenues in Ireland (40%+, 25% and 50%) and the
revenues are rising at double-digit rates.
These are fake tax avoidance related exports that
reflect activities in many countries.
Irish Economy: Ireland's ephemeral services export boom
The CSO's monthly services index has a
panel of 2,100 firms and it reported in June that
the index increased by 2.2% in April 2014 when compared with March 2014 and
there was an annual increase of 4.1%.
On the PMI report, Markit says today that the seasonally
adjusted Business Activity Index - - which is based on a single question
asking respondents to report on the actual change in business activity at their
companies compared to one month ago - - registered at 62.6 in June to
signal a further strong expansion in activity. Rising from 61.7 in the previous
month, the index signalled a quicker rate of growth. Panellists reported that
improving economic conditions had led new work to increase, thereby supporting
the expansion in activity. Growth of activity has been recorded in each month
since August 2012.
Service providers remained confident that activity will
continue to rise over the coming year, with sentiment largely unchanged from
that seen in May. Expectations of strengthening economic conditions and the
launch of new products were mentioned by panellists.
Higher new orders from both domestic and export clients
led total new business to increase in June, extending the current sequence of
expansion to 23 months. The rate of growth in new export orders quickened in
June as companies were reportedly able to secure new foreign business from both
new and existing clients.
Outstanding business increased at a solid pace as
companies struggled to keep up with the pace at which new business was received.
Strong growth of new work led companies to raise their
staffing levels again in June, with the rate of job creation quickening from
that seen in May. Employment has now increased in each of the past 22 months.
The rate of input cost inflation quickened for the third
consecutive month during June and was the fastest since March 2011. According to
respondents, higher staff costs was the main factor leading input prices to
rise, but the recent strength of sterling against the euro was also mentioned.
Some companies were able to pass on higher cost burdens to
their clients in June, thereby leading to a third successive monthly rise in
output prices. Moreover, the rate of inflation was solid and the sharpest since
Philip O‟Sullivan, chief
economist at Investec Ireland said: "Thursday's Q1 National
Accounts release from Ireland‟s Central Statistics Office will provide the first
'hard data' on the performance of services exports since the start of the year.
Ahead of this release, the improvement in the Export index of the Services PMI
over the same period bodes well in that regard.