Business activity in the services sector grew for the second month running in July, and recorded its biggest rate of increase since December, according to a report published yesterday.
The NCB Purchasing Managers' Services Index shows that total activity in the sector hit 51.9 last month. This was the second month in a row that the index read above the critical no-change 50 mark.
In June it spiked slightly to 50.2. The previous month's reading is taken as the benchmark 50 figure, any return below this indicates that activity is falling.
The news came as similar indices in the European Union, Britain and the US showed strong growth in the services sector last month.
The UK Chartered Institute of Purchasing and Supply/Reuters index jumped to 56.6 from 54.5 in June, its highest since May 2002.
The US equivalent hit a six-year high in July to reach 65.1, from 60.6 in June.
The euro-zone business activity index, which covers 2000 businesses that include everything from airlines to cleaning companies, reached 50.2, compared with 48.2 in June, its first increase since December.
NCB chief economist Mr Eunan King said the results of the European indices would have a positive impact on this country.
"That's an important influence because a fair share of our services are exported," he said.
However, the NCB index shows that the Irish service industry continued to shed staff during the month.
Overall employment fell from 49 to 48.1, its lowest level since April. NCB said the introduction of productivity measures allowed companies to cut staff while taking on new business.
The sector is being squeezed by costs and pricing. Input prices (costs) rose to 60.3, while one in four of those surveyed reported higher-than-average costs.
At the same time, service providers are being forced to charge less, with this element of the index posting a fall to 48.2.
Business confidence was high last month. The business expectations index rose to 70.3, its highest level since March. NCB said the upbeat return reflected a perception in the sector that the downturn was nearing its end. The incoming new business index rose for its second month to 50.9.
A breakdown of the index shows that only financial services recorded an increase in activity to 51.7 in July. Business services declined marginally to 49.6; technology, media and telecoms slipped to 48.7; and transport, travel tourism and travel fell to 48.9.
Mr King pointed out that the individual components were not seasonally adjusted. "The important thing is that the overall picture is improving," he said.
"The US economy is looking better," he added.
"Capital spending plans are up by one-third on the first quarter, so the outlook is a lot better. The influence of things like the Gulf War and SARS is beginning to fade."
The NCB Purchasing Managers' Index is based on a survey of 600 regularly participating companies in the services sector
