Services sector activity at 17-month high

Activity in the country's services sector shrank at the slowest pace in 17 months in August, with firms more optimistic than at any time since June 2008.

The NCB Purchasing Managers' Index rose to 46.7 from 42.4 in July. The index stayed below the 50 mark that separates growth from contraction but the August reading was the highest level since March 2008 and marked one of the biggest upward jumps in its history.

NCB said the ongoing recession was the main cause of the latest fall in activity, with each of the four monitored sectors - business services; financial services; technology, media and telecoms; and transport, travel, tourism and leisure - posting lower activity last month.

Service providers continued to see improved sentiment in August, with optimism recorded for the fourth month in a row as firms anticipated an improvement in economic conditions in the coming year.

The survey reveals that new orders continued to decrease substantially last month, although the pace of decline eased to its weakest since May 2008. New business has now shrunk in each of the past 19 months.

Outstanding business fell sharply again in August, extending the current period of contraction to two years. However, NCB noted that the latest decline ws the slowest since May 2008.

It added that while the rate of job cuts eased a little in August, employment levels still decreased at a severe pace. Companies reported reduced staffing levels due to decreasing workloads as well as cost-cutting efforts.

Input prices fell again last month, mainly due to reduced salary payments as well as increased competition. Input costs have now fallen for the last eight months, with August's reduction the fourth-fastest in the series history.

Commenting on today's survey, NCB economist Brian Devine said that there were two positives to take from August's figures.

He said that the business activity index increased by the third largest amount ever (4.3 points) in August as it edges closer to the 50 mark, which divides contraction from expansion.

He also said it was encouraging to see that new export business made an impressive gain, rising to 49.9 - just short of the 50 mark. The economist says this is important as the key stimulus for the Irish economy will come from regaining competitiveness and attracting demand as the global economy recovers.