Faster growth of new business fuelled another strong month for the Irish service sector PMI (purchasing managers' index) in April as activity continued to rise sharply and business sentiment picked up. Meanwhile, companies were able to raise their output prices to the greatest extent since June 2002.
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 – pointed to a sharp rise in activity again in April, despite falling slightly to 60.6 from 60.9. Panellists reported that improving economic conditions meant that clients were more willing to commit to new projects.
According to the Markit survey, strong growth was recorded across all four monitored sectors. Business sentiment strengthened amid forecasts of further improvements in economic conditions over the coming year. Optimism was the highest in 14 months as more than 61% of respondents forecast higher output. New orders rose for the thirty-third month in a row in April, and at a sharper pace.
Panellists reported higher new business from both domestic and export clients. New business from abroad also rose at a sharp pace, albeit one that was the slowest since May 2013. Respondents indicated that the UK had been a key driver of growth in new export orders. Higher new orders led to another accumulation of outstanding business in April, with backlogs rising solidly during the month. Work-in-hand has now increased in each of the past 23 months. Increased new business also led companies to raise employment in April. Job creation was recorded for the thirty-second successive month, and the latest rise in staffing levels was sharp.
Rises in wages and salaries contributed to another increase in input costs, while higher utility costs and the recent weakness of the euro were also mentioned. That said, the rate of cost inflation eased slightly from March. Output prices rose markedly in April, with the rate of inflation quickening to the sharpest since June 2002. Some respondents indicated that they had been able to increase their charges in response to input cost inflation, while others highlighted the impact of the weak euro.