Growth in Irish services bucks euro area trend

ACTIVITY IN Ireland’s services sector grew at the fastest pace in 19 months in September, bucking a euro area-wide trend of dwindling new orders and faster layoffs.

The latest NCB Stockbrokers purchasing managers’ index (PMI) for the Irish sector also showed a surge in export orders helped push up employment for the first time since March.

The index, which is compiled from a questionnaire sent to more than 600 companies in the sector, rose to 53.9 from 51.7 the previous month. A reading above 50 denotes an expansion in activity.

The growth bucked the trend across the euro area, where a series of business surveys dented hopes of a return to growth before 2013.

Markit’s Eurozone Composite PMI fell to 46.1 in September from 46.3 in August. While revised upwards slightly from a preliminary reading two weeks ago, the index has been stuck below the 50 mark for all but one of the past 13 months.

Order books shrank last month at the fastest pace in more than three years, while firms cut staff at the fastest pace since January 2010.

Overall the surveys suggested aggressive action from the European Central Bank over the last two months has yet to lift the real economy in any meaningful sense.

The services sector in Europe’s largest economy, Germany, shrank unexpectedly in September and business sentiment among companies slid to its lowest level in 3½ years.

In France the sector slumped even further than first thought, with service companies cutting jobs at the fastest pace in 33 months.

Italy’s service sector shrank for the 16th month in a row in September, albeit at the slowest pace since January, with a drop in new business and one of the sharpest falls in employment since 2009.

“Rather than clearing, the cloud of uncertainty hanging over business investment and spending got notably darker in September,” said Chris Williamson, chief economist from Markit, which compiles the data.

Service providers in Ireland, ranging from hotels and hairdressers to IT firms and telecoms, have been among the worst hit in the recession.

However, the NCB’s sub-index measuring new business showed Irish service firms grew at its sharpest rate in more than two years, with survey respondents mentioning new export orders from Japan, Germany, the United States and the United Kingdom.

The volume of new export business received by Irish service providers rose for the 14th successive month in September.

The latest increase was the second strongest since March, having regained some of the momentum lost in August.

Employment grew for the first time in six months, with the sub-index growing to 51.5 from 49.1. Though the recruiting drives were only modest, it was the first indication of job creation since March.

“It is encouraging to see panellists report an improvement in new business in both domestic and international markets, and this is helping to feed into an improvement in services employment,” said Philip O’Sullivan, chief economist at NCB Stockbrokers.

– (Additional reporting: Reuters)