The Irish services sector experienced a sharp increase in activity last month supported by strong growth in new orders, according to the latest NCB Purchasing Managers' Index.
At 62.7 in February, the rate of growth improved for the third consecutive month and was the highest since last September. Around 42 per cent of firms indicated that activity was higher compared to one month ago.
Service sector growth across the euro zone remained buoyant last month, while strong jobs creation and a surge in business confidence to its highest level in more than a year suggest a rate hike this week is practically a done deal.
However, any chance of a rate rise in the UK dimmed as the services sector grew more slowly than expected and output price inflation moderated. The index reading of 57.4 last month, from 59.2 in January, was the weakest since September.
Growth in the US was also disappointing with the Institute of Supply Management index tumbling from an eight-month high of 59.0 in January to 54.3.
"Once again, the Irish services PMI shows very strong activity growth in this crucial sector of the economy," said NCB chief economist Dermot O'Brien.
"New orders rose sharply in February, pushing growth in outstanding business to its highest in nearly 6½ years. Meanwhile, employment continued to expand robustly and business confidence hit a four-month high." Business activity has risen in each month since June 2003 and reports suggested that higher new order volumes underpinned the latest expansion, NCB said.
New business improved in February and at its fastest rate in five months and has now risen for 45 months in a row. An improvement in domestic and foreign demand, alongside marketing activities, contributed to a substantial increase in sales, according to NCB.
Financial services companies registered a substantial rise in activity last month, while activity increased at technology, media and telecoms firms for the 42nd consecutive month. Following a decline in the previous month, activity rose sharply at transport and leisure companies in February.
Employment in services firms has now risen in each month of the past 3½ years. Reports from firms suggested that staff were hired as part of efforts to expand business activity and attract new orders.
However, input costs rose at a substantial pace in February. Staff salaries and energy costs were widely reported to have increased as the rate of cost inflation accelerated to an eight-month high. Input prices rose at a sharper pace than the averages for the past year.
Output charges increased for the 20th consecutive month. Moreover, output prices rose at a robust pace that was well above the average for the past year, NCB said.
Increased charges were widely linked by firms to efforts to pass on higher input costs to customers. But business confidence remains high. - (Additional reporting Reuters)
