Investec Services PMI Ireland May 2018
The latest Investec Services PMI Ireland report shows a marked recovery in growth in business activity in April, likely helped by the easy comparative provided by the adverse weather in March.
The latest Investec Services PMI Ireland report shows that the rebound from the extreme weather conditions in March continued in May, with growth of business activity accelerating for the second month running to the fastest (59.3) since January. Activity has now increased in each of the past 70 months.
While the rate of growth in New Orders cooled slightly from April, it remained sharp amid reports of strength in the wider Irish economy. Overseas demand firmed last month, with the pace of expansion in New Export Business quickening to its fastest since January 2016, with a number of panellists noting higher new orders from UK clients.
Helped by this healthy demand, services companies reported a further rise in Backlogs of Work, albeit not quite at the same level of growth as had been seen in April. Similarly, while the sequence of growth in the Employment index now stretches to 69 months, the rate of increase in hiring activity was slightly lower than the year to date high that was posted in April.
Turning to margins, Input Costs continued to rise sharply, with some panellists noting higher fuel prices while others mentioned increased staffing costs. Firms were able to pass on at least a portion of this pressure to end-customers, although we note that the rate of inflation in Charges has moderated to a 19 month low. In any event, stronger volumes helped to deliver the fastest pace of expansion in the Profitability index since the three months to end-August of last year.
While the forward-looking Confidence index rose at a slower pace last month, Irish services firms remain very upbeat, with the index remaining above the series average. Around eight times as many respondents predict a rise in activity over the coming year as against those who anticipate a decline, while data for the components of the services sector that are covered by this report (Business Services, Financial Services, TMT and Travel & Leisure) signal the breadth of optimism, with all four areas recording above-50 readings for a 72nd successive month.
Taken together with last Friday’s Investec Manufacturing PMI (where the headline index improved to a three-month high), the May PMI reports suggest that growth in activity across much of the private sector in Ireland has rebounded after the weather inspired softness that was seen in Q1 2018.
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