Ireland: Services PMI drops but still points to solid expansion in February
The Investec services Purchasing Managers’ Index (PMI) declined in February from 59.8 points to 57.2 points. Despite the drop, the index remains comfortably above the 50-threshold that separates expansion from contraction in the services sector, where it has been for over five years.
February’s print reflected slower expansions in new orders and business activity. New orders growth declined marginally in the month compared to January but remained robust overall thanks to higher demand from domestic and overseas markets. The increase in business activity was driven by improved economic conditions, healthy new business and strong client sentiment.
Higher work volumes resulted in an accumulation of backlogs of work, which was accentuated by labor shortages as the labor market continued to tighten. Staffing levels increased for the 66th consecutive month, but the rise was the slowest in 9 months. Regarding price developments, higher fuel and staffing costs pushed input prices higher and resulted in higher output prices for clients.
Commenting on the business expectations index, Philip O’Sullivan, Investec’s Chief Economist for Ireland, said:
“The forward-looking Business Activity: Expected Levels in 12 Months’ Time index shows that firms are very optimistic on the outlook, with February’s reading the highest since September. This optimism is broad-based, with all four of the segments of the services sector that are captured by this survey (Business Services, Financial Services, TMT and Travel & Leisure) simultaneously above 50 for a 69th successive month in February. Given the improving global economic backdrop, we think that this optimism is well-placed.”