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News : Irish Economy Last Updated: Aug 7, 2015 - 8:00 AM

Irish services PMI fastest rate since late 2006; Official data up only 2.4% in 12 months
By Michael Hennigan, editor of Finfacts
Aug 6, 2015 - 7:22 AM

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The Irish services PMI (purchasing managers index) survey that includes the big US firms such as Google and Microsoft who book foreign sales in Ireland for tax purposes, shows a surge in activity in July but on Wednesday the CSO reported that its monthly services index which excludes financial services has risen only by 2.1% in the 12 months to June.

Markit said 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 – rose to 63.4 in July from 63.3 in June, its highest reading since September 2006.

Activity has now risen on a monthly basis throughout the past three years. Panellists mainly linked the latest increase in activity to improving economic conditions. Business sentiment was strongly positive in July, and unchanged from that seen in June as companies predict further improvements in economic conditions to create opportunities for growth. Total new business rose at the third-fastest pace in the survey’s history during July, behind only those in July and August of 2000.

Again, Markit says that general improvements in economic conditions had reportedly helped companies to secure new work. Service providers also recorded strong growth of new export orders, with the weakness of the euro against sterling contributing to the securing of new work from UK clients. Rising new business led to another sharp increase in backlogs of work, with the rate of accumulation quickening to the fastest since September 2014. A further increase in employment was recorded during July. Moreover, the rate of job creation was substantial, and marginally quicker than seen in the previous month.

The rate of input cost inflation quickened for the third consecutive month and was the sharpest since September 2008. According to respondents, a combination of the weaker euro and higher staff costs had been behind the latest rise in input prices. Some panellists were able to pass on higher costs to clients in July, thereby resulting in a sixteenth consecutive monthly rise in prices charged. Markit said that said, competitive pressures prevented a stronger increase in output prices, and the rate of inflation eased to the weakest since February.

The panel includes around 450 private companies but Markit does not disclose the response rate.

The CSO has a panel of 2,100 enterprises and the response rate for the provisional results is typically 49% in terms of the enterprises surveyed which represents 70% of the value of total turnover.

The seasonally adjusted monthly services value index increased by 1.3% in June 2015 when compared with May 2015 while, in the year to June 2015, there was an increase of 2.4%.

On an annual basis, Professional, Scientific and Technical Activities (+14.4%), Accommodation and Food Service Activities (+13.3%), Wholesale and Retail Trade (+10.5%), Administrative and Support Service Activities (+3.6%) and Other Service Activities (+0.9%) increased when compared with June 2014. Information and Communication (-12.1%) and Transportation and Storage (-1.0%) decreased in the year to June 2015.

Fact and Fiction: Time to review Ireland's economic statistics?

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