Services sector enjoys strong finish to 2017

The services sector has enjoyed a strong finish to 2017, according to the latest Investec Services PMI Ireland report.

The headline PMI strengthened to 60.4 in December, an eight month high, from November’s 56.0 outturn.

Any mark over 50 is deemed growth.

The improvement appears to have been domestically-driven, as the new export orders component saw a moderation in the implied growth rate, notwithstanding higher orders from UK clients.

Overall the report shows that new orders grew at a slightly faster pace in December than in the previous month, with more than two-and-a-half times as many panellists reporting a rise in new business as opposed to those disclosing a decline.

Companies responded to the increased client demand by adding to headcounts.

The employment component of the index has now posted 64 successive above-50 readings.

The improvement in hiring was demonstrated by December being the 14th consecutive month in which employment simultaneously grew across all of the segments of the services sector that are captured by the report, including business services, financial services and travel and leisure.

Despite the availability of extra resources, business outstanding increase for the 55th successive month in December.

Looking at margins, companies experienced another rise in input costs, with higher salaries, insurance costs, and utility prices blamed for the latest increase.

However companies were able to pass some of the costs on, with the rate of growth in prices charged quickening to a five month high.

These price increases, allied to volume growth, have led to a strengthening in the profitability index.

Earlier this week manufacturing data from Investec showed that new orders and employment in the manufacturing sector here rose at their fastest pace in 20 years as 2017 drew to a close.

The pace of growth in the manufacturing sector as the year ended was the strongest since the survey began in 1998.

“Combining that [manufacturing data] with today’s eight month high in the headline Services PMI indicates that the momentum behind the Irish economy going into 2018 is very strong,” Philip O’Sullivan, chief economist with specialist bank Investec, said.

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