Services PMI sees sharpest rate of expansion in 6 years

Tuesday 06 August 2013 07.15
Hot weather boosts services industry in July - PMI
Hot weather boosts services industry in July - PMI

July saw continued positive momentum in the country's services sector, with new export business expanding for the 24th month in a row.

The Investec monthly Services Purchasing Managers index moved up to 57.6 in July - the sharpest rate of expansion seen in the sector in six years and the 12th month of growth in a row.

Any figure over 50 signals growth in a sector, while under 50 signals contraction. The index had stood at 54.9 in June.

The hot weather in July was cited by some companies as a factor behind the latest improvement and the travel, transport, tourism and leisure sub-sector of the index saw its fastest increase in activity since June 2011.

The other sub-sectors had contrasting fortunes - the rate of growth in business services was marginally better, while technology, media and telecoms saw a slowdown in growth and financial services actually contracted.

Today's survey shows that new business growth in the services sector gathered pace in July and growth of new work was the strongest since March 2007. Companies said that new clients had been secured during the month, which boosted new order levels.

Higher new order levels also lead to job creation among service providers last month. Employment increased at the fastest rate since December 2006 and Investec noted that job creation in the sector has been recorded in the last 11 months in a row.

Profits improved for the second successive period in the three months to July, but the rate of growth eased from the previous survey period. Increased input costs and lower output costs had caused profits to fall at some companies.

Investec economist Philip O'Sullivan said that a key positive within today's survey is the employment component.

''The rate of increase in job creation was the highest seen since December 2006, while unadjusted data suggest a broad-based improvement, with the employment reading for all four sub-sectors above the 50 'no-change' level for a fourth successive month,'' he said.

''We would expect to see further encouraging Services PMI readings throughout the remainder of this year and beyond,'' he added.