The NCB Ireland Services PMI release for January is a very encouraging. The headline PMI, at 56.8, shows that the Irish services sector is expanding at its fastest pace since August 2007.
Within the data, we see that growth in New Business remains healthy, with respondents reporting an improvement from both domestic and external markets during January. We are encouraged to see that the rate of growth in New Exports stands at the highest level since the series began in June 2002. These positive dynamics are encouraging employers in the services sector to take on more staff, with the Employment index increasing at its fastest rate since Q1 2007.
For some time now we have highlighted the mis-match between output prices (falling) and input prices (rising) for the sector. Output prices have been in negative territory since July 2008, but last month saw the slowest rate of decline since then, with the unadjusted data pointing to prices increasing in three of the four segments of the services sector during January. On the input side, costs rose at their fastest pace in three months during January. Panellists attributed this to increased taxation, energy costs and, interestingly, higher salary payments.
Looking ahead, with the ‘Business Activity: Expected Levels in 12 months’ time’ index continuing to point to a confident outlook for the players in the sector (indeed, the unadjusted confidence reading for all four sub-sectors – Business Services, Financial Services, TMT and Transport & Leisure – recorded an improvement during January), we expect the recent positive trends to continue over the coming months.