Belfast Telegraph

Northern Ireland likely to share in services rebound

By Margaret Canning

Northern Ireland's services sector is likely to be sharing in a UK-wide bounce-back after output beat expectations and returned to growth following July's contraction.

The closely-watched Markit/CIPS services purchasing managers' index (PMI) showed a reading of 52.9 in August, up from 47.4 in July and above economists' expectations of 50.0.

A reading above 50 indicates growth.

And PwC NI chief economist Esmond Birnie said he believed Northern Ireland would be sharing in the rebound in the sector, which covers everything from restaurants to accountancy firms.

"My instinct is optimistic as some of the trends, notably the exchange rate effect on trade, will read across," he said.

The services sector accounts for around 75% of the Northern Ireland economy - slightly below the 79% share it commands in the UK as a whole.

A survey by data company Springboard of footfall during last week's Bank Holiday showed an increase in activity - particularly in the evenings, with footfall in towns and cities right across Northern Ireland up around 20% on Saturday evening. July marked the services sector's first contraction since December 2012 - while activity recorded its steepest decline in over seven years, as Brexit uncertainty took its toll on the industry.

However, the sector swung back to growth in August as companies reported that uncertainty had eased.

The report said the month-on-month gain of 5.5 points was the biggest leap since the survey began 20 years ago.

Output picked up after new work grew at its fastest pace for four months, after the pound's slump to 31-year lows following the EU referendum result lifted the demand for exports and bolstered UK tourism.

The sector also saw confidence return to its pre-Brexit vote levels, while employment also notched up in August following a pause in July.

Businesses in the industry were feeling more confident about export opportunities, stable markets and reduced uncertainty, while some were lifted by signs of recovery in the energy sector, the report said.

However, the weaker pound ramped up costs to a near three-year high, causing services firms to bump up their prices at the fastest rate since January 2014.

The rebound comes after a surprise swing in manufacturing output in August, notching up its highest monthly rise in a quarter of a century.

The UK construction industry also showed signs of recovery last month as activity picked up from July's seven-year low.

Chris Williamson, chief business economist at IHS Markit, said the record rise in services builds on the last week's positive PMI reports for construction and manufacturing.

Belfast Telegraph