Irish consumers and visitors are helping to spur activity in the services sector, with a gauge of activity pointing to a “blistering” pace of expansion.
The Investec Services Purchasing Managers’ Index (PMI) touched 61.7 in May, with any reading above 50 indicating expansion of activity and any figure below 50 showing contraction.
The gauge covers hotels and restaurants, transport and storage, post and telecommunications, financial intermediation, renting and business activities.
“The 61.7 headline PMI reading suggests that the sector is expanding at a blistering pace,” said Investec Ireland chief economist Philip O’Sullivan.
He said the new business component of the survey posted its 22nd consecutive month of growth in May. However, new export business slowed to an eight-month low.
Mr O’Sullivan said that while most components in the new report pointed to a moderation in the rate of expansion, he wasn’t particularly concerned given the “white-hot” rate of growth that was recorded in the services sector in April, which was the fastest rate of expansion since February 2007.
“The rate of job creation remained sharp, despite easing to its weakest level since November 2013,” he said.
“Irish services companies have now added to their headcounts in each of the past 21 months.”
Mr O’Sullivan said unadjusted data showed an appetite to continue increasing staffing levels. He said that was necessary given that the ‘business outstanding’ element of the survey, which measures backlogs of work, had consistently grown in the past 12 months.
The robust data will provide a further boost to the government. This week, it reported Exchequer returns that were €446m, or 2.9pc, ahead of estimates for the first five months of the year. There was €15.6bn in tax collected in the period, up 5.6pc on the corresponding period in 2013.
Income tax returns, which reflect the level of employment in the economy, rose 7.8pc year-on-year to €6.6bn during the first five months of 2014.
Earlier this week, Investec said a gauge of manufacturing activity in Ireland during May slipped to 55 from 56.1 in April. That was the 12th straight month of expansion.
Mr O’Sullivan said that with decent manufacturing PMI data combined with yesterday’s figures from services “bodes well for the performance of the wider Irish economy during the second quarter and beyond”.
Investec said that the UK was the main source of new export orders within the services sector in May.