Services sector activity increasing, index shows

ACTIVITY IN Ireland’s services sector continued to rise in May, but employment remained weak, the latest NCB Purchasing Managers’ Index showed. The index rose to 52.4 during the month, remaining above the 50 mark that separates growth from contraction. The rise follows a reading of 51 in April, the first time activity increased in the sector in over two years.

The sub-index measuring new business also continued to climb, growing from 51.4 to 52.3.

“Although weaker than the long-run series average, the rate of expansion was the sharpest since December 2007,” the report said.

New export orders rose significantly during the month, outperforming the growth registered for overall new business. On a sector by sector basis, the technology, media and telecoms category recorded the steepest rise in activity.

The report noted that the only sector to post a decline in activity was transport and leisure, but this should be boosted by the weak euro in the coming months. However, employment remained below 50, at 46.8. This is in contrast to the manufacturing index, which saw employment rise in May.

“The services sector is far more important for employment than the industrial sector, which accounts for just 13 per cent of employment,” the report said. “The weakness in the services sector labour market was evident in [Wednesday’s] Live Register figures.”

The register increased by 6,600 to 439,1000, taking the rate of unemployment in Ireland to 13.7 per cent.

The services sector continued to expand across Europe during May. The Markit Eurozone Services Purchasing Managers’ headline business activity index for the euro zone rose to 56.2 in May from 55.6 in April. This is the ninth month in a row it has been above the 50 mark and slightly higher than a preliminary reading.

Activity at French firms grew at the fastest pace in nearly four years in May, although their German and Italian peers showed signs of struggling to keep up, according to the PMI surveys for individual euro zone countries.

The purchasing managers’ surveys recorded order books expanding at a slower rate for service companies ranging from banks to restaurants in the UK, euro zone and China, although the jobs outlook was generally brighter.

Firms in the euro zone ended a two-year stretch of job losses as the headline PMI index there hit its highest since August 2007. But British companies, worried about impending public spending cuts, shed staff in May. – (Additional reporting, Reuters)