Sharp uplift in service sector activity

The service sector experienced a sharp uplift in business activity last month, while the rate of cost inflation eased to a 10…

The service sector experienced a sharp uplift in business activity last month, while the rate of cost inflation eased to a 10-month low, the latest survey from NCB Stockbrokers shows.

"The private service sector saw a very robust start to the new year, with confidence at a high level and business activity growing strongly," said Dermot O'Brien, the chief economist at NCB.

According to NCB's latest Purchasing Managers Services Index, January was the 44th consecutive month in which business activity has increased in the sector.

Last month's rise was driven mainly by significantly higher new order volumes and recent growth in employment.

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The most marked pick-up in business activity was recorded in the technology, media and telecoms (TMT) area. The TMT sector also displayed the highest level of business confidence, with expansion plans contributing to the positive outlook.

The level of optimism in the services sector as a whole remained high in January, with over half of all firms surveyed anticipating higher levels of activity in a year's time.

Factors such as marketing campaigns, expansion plans, and in some cases the introduction of new products or services supported these positive expectations. Input costs faced by service sector firms rose strongly.

Some respondents have also indicated that salary levels were pushed up by increased competition for experienced staff, and higher electricity costs were also reported.

Business services providers were hardest hit by inflationary pressures, with substantial input cost increases recorded by firms operating in this sector area.

Nevertheless, the overall rate of cost inflation was still the lowest recorded since March 2006.

Employee numbers in the service sector displayed strong growth as companies expanded their capacity in response to higher new order volumes.

According to Mr O'Brien the survey findings bode well for the year ahead: "These positive signals from the service sector suggest that expectations of another year of strong growth in the economy are well founded."