Services doing the business again as growth speeds up

The services sector picked up speed in November, showing a slight rise in the pace of growth.

The Investec Services Purchasing Managers Index (PMI) rose to 56 last month, up from a 41-month low of 54.6 in November, leading to speculation that the worst had passed for the sector.

New business reached a three-month high, despite a slight fall in new export business that was being attributed to uncertainty around Brexit. That was the first decline recorded in more than five years for that component on the index, with sterling weakness hitting the competitiveness of Irish providers. Among the sectors particularly hard-hit by this were business services, which recorded a fourth successive monthly fall in exports, and travel and leisure, where export growth was at a 55-month low.

Wage growth

Input costs continued to rise in November, with cost increases linked to wage growth and rising insurance premiums. Firms also saw output prices rise, pushing the profitability index into positive territory, following a decline in October.

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The rate of growth in employment also improved, linked to the improvement in new orders.

About seven times as many firms said they expected to see an increase in activity over the coming year, as against those who anticipate a decline.

“All in all, while the services sector is clearly not out of the woods yet, it is encouraging to see, as with last week’s manufacturing PMI release, that the pace of growth for this sector quickened in November,” said Investec’s Philip O’Sullivan.

"Our suspicion is that the worst of the pressures faced by the more external-facing parts of the Irish economy in the immediate aftermath of Brexit has passed, with the latest Investec PMIs for Ireland giving comfort to this view."