Business activity and job creation in the services sector continued to grow strongly in June, according to the latest NCB Purchasing Managers' Index (PMI) for the services sector.

The seasonally adjusted business activity index, published yesterday, fell slightly in June to 65.3 from 66.2 in May, but remained well above the benchmark value of 50 indicating a continued strong performance. The employment index remained firm at 60.5, compared with 60.7 in May, indicating the 34th straight month of job creation.

Confidence in the sector also remained high in June, with an index reading of 71.8, although somewhat less than the May reading of 74.4. Volumes of outstanding business continued recording strong growth and backlogs of work continued to rise, although at slightly lesser rates of increase than May.

But the increase in the index for input costs rose sharply to 66.7, from 65.3 in May, suggesting that business costs continue to increase strongly. As a result, prices charged by services firms rose at the most marked rate for four years in June, as companies protected profit margins by passing on costs to consumers.

"New business was strong and outstanding business continued to grow. There was a further rise in output prices indicating some success in passing on still rising input costs," NCB economist Eunan King said yesterday.

Euro-zone service sector activity also performed well, according to the latest RBS/NTC Eurozone services report. The report, published in tandem with the NCB PMI, shows business activity in the sector - which accounts for approximately two-thirds of the euro-zone economy - rose to 60.7 from 58.7 in May and reached its highest level since June 2000.

Analysts interpreted that the latest figures increased the chances of an early rise in interest rates. "I wouldn't be surprised to see a hike in July, followed by another one in August," NTC Research chief economist Chris Williamson said. - (Additional reporting, Reuters)