First Rise in Ireland’s Business Activity in 4 Months As New Orders Increase

Steven Bobson, Europe & Americas Editor
September 09, 2012 /

NCB’s seasonally adjusted Business Activity Index has signaled a first increase in Ireland’s business activity in four, albeit modest rate of growth.

Cathal O’Leary, Head of Fixed Income at NCB Stockbrokers said: “The NCB Services PMI signalled that business
activity in the services sector expanded (51.7) during August for the first time in four months. Respondents partly attributed the modest growth in activity to higher new business (52.6) from both domestic and external sources. On the latter, new export orders grew (54.1) for the thirteenth month in a row in August.

“More than 43% of respondents forecast business activity to be higher in 12 months’ time, with improving economic conditions and new product development expected to be supportive of activity. This compares to 17% of respondents who predict that business activity will decrease over the coming year.

Optimism regarding the 12-month outlook for activity improved to the strongest in three months as signs of strengthening economic conditions and new product development led companies to predict a rise in activity.

For the fifth time in the past seven months, overall new business increased. The latest expansion was solid, with panellists reportedly securing new orders from both new and existing clients. New export orders rose again, extending the current sequence of growth to 13 months. New business from abroad grew more quickly than overall new orders.

Respondents indicated that they had been able to increase market shares in some export markets. Backlogs of work decreased for the ninth month running as respondents indicated that projects had been completed at a faster rate than new business had been received.

Business restructuring efforts were partly behind a further reduction in employment at Irish services companies during August. Staffing levels in the sector have decreased in four successive months, although the latest decline was only slight.

The rate of input cost inflation quickened markedly in August, and was the sharpest since March 2011. According to respondents, higher fuel prices was the main driver of cost inflation, while higher average salaries were also mentioned.

In spite of rising input costs, Irish services companies continued to lower their output prices. Charges decreased for the forty-ninth successive month. Although the rate of decline slowed, it remained marked. Strong competitive pressures had been behind the latest fall in output prices.

O’Leary continued: “There was a marginal decline in employment on the month (49.1), partly reflective of increased business restructurings. Input costs increased sharply on the month (57.9), driven primarily by
higher fuel costs.

“In terms of individual sector performance, August was a mixed bag. Business activity in Financial Services (51.0; unadjusted) and Transport, Travel, Tourism & Leisure (53.1) expanded over the course of the month, while Business Services (43.9) and Technology, Media & Telecoms (43.5) were considerably weaker.”


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