Job creation in the services sector is running at its fastest rate in over five years, driven by the financial sector, according to the latest NCB Purchasing Manager's Index. But there was a sharp downturn in activity for the tourist industry where rising prices hit custom.
The index of current business activity was 61.0 compared to 61.1 in December, indicating that the end year pace of growth has been sustained in January, the thirty-third month of successive growth. Any index value greater than 50 means that conditions have improved in the preceding month.
By sector, activity was strongest in financial services, where the index jumped from 62.1 to 65.5. In the business services and technology, media & telecoms sectors, activity continued improving, albeit at a slower pace than December. Business services registered an index of 60.9 in January, compared to 62.5 in December while in technology, media & telecoms the activity index was down slightly at 62.7, compared to 62.9.
But a sharp fall in overall activity was evident in transport, travel & tourism. The sector index fell from 51.5 in December, indicating modest growth, to 42.1 in January, indicating decline.
The survey sub-index on employment rose to 57.3, its highest level since December 2000, with very strong gains evident in the financial services sector.
The price sub-index reveals that service providers increased their prices for the seventh successive month in January, reflecting continuing increases in cost pressures.
The index of business expectations remained strongly positive at 75.5, a sign that most businesses remain confident of trends over the coming year.
The euro area services PMI for January was also released yesterday, showing a modest increase from 56.8 to 57.0.
The improvement raises the chance that the European Central Bank (ECB) will raise interest rates in March in response to improving growth and inflationary pressure.
"This improvement supports our view that after a likely moderation in the fourth quarter, GDP growth probably returned to around trend at the start of 2006," said Citigroup analyst Carmen Nuzzo. - (Additional reporting: Reuters)
