The latest NCB Services PMI shows that activity in the Irish services sector expanded in March, albeit at a slightly slower rate (52.3) than in February (53.6). Although growth in the headline Business Activity index has slowed for the second consecutive month, it’s worth noting that January’s expansion (56.8) was the largest recorded since August 2007.
New Export Business recorded its twentieth month of expansion during March, with the pace of expansion picking up on February. This strength in exports drove an increase in New Business, the eighth such increase in a row. In turn, the improvement in New Business was cited as a factor behind the seventh consecutive expansion in the Employment index.
The pricing environment remains very difficult, however, with higher fuel costs continuing to push up Input Prices as competitive pressures weigh on Average Prices Charged. The net effect is that Profitability deteriorated again during the month.
In all, the key positive from this morning’s report is the continued strength in New Export Business. Services exports were an important contributor to Irish economic growth last year, with total export growth of 2.9% driven entirely by strength in the services sector (+8.9% vs. -2.9% for goods exports). Indeed, in 2012, Ireland’s services exports exceeded goods exports for the first time on record. In that regard, it is encouraging to see that the survey’s “Business Activity: Expected Levels in 12 Months’ Time” index continues to reflect solid optimism on the part of service providers, with reports that new export business would be a key source of growth over the coming year.