Surge in performance of services sector offers boost to economy
A shock jump in the performance of the UK services sector combined with a number of recent inward investment announcements by IT-focused companies should help revive the Northern Ireland economy, analysts have predicted.
Latest data from Markit/CIPS showed activity from UK services surged at its fastest pace in more than a year during May and that's expected to be replicated in the sector in Northern Ireland in the coming months.
England, Scotland and Wales are counted as major export destinations for Northern Ireland's service sector, one which is heavy with the likes of IT companies.
"The rest of the UK and the Republic are the biggest markets for Northern Ireland's services so such a strong performance there bodes well for us," Richard Ramsey, economist at Ulster Bank stated.
In addition, news of over 1,000 new jobs over the last few weeks should boost performance further.
That includes another 650 new posts for US insurer Allstate, nearly 180 for Deloitte and around 70 each for both Merchant Warehouse and Vello.
And latest data on the hotels sector has also helped.
ASM Chartered Accountants said yesterday that an additional 270,000 hotel rooms were occupied across Northern Ireland in 2012, a figure which is 15% up on 2011.
Meanwhile, the stronger-than-expected performance from the UK services sector – which makes up more than three-quarters of wider economic output – follows improved readings from both the manufacturing and construction sectors in May.
Economists said the UK's outlook is "clearly brightening", lifting hopes it will build on first-quarter growth of 0.3%.
The 54.9 reading was the fifth consecutive month of service sector growth and followed a 52.9 level in April – making it the strongest reading since March 2012.
Companies added staff for the fifth month in a row and said improved weather helped drive growth, along with better market conditions.
Companies also reported higher sales volumes, promotions, new product launches and a willingness among customers to commit to new business.
That helped drive the fastest increase in new work since February 2010.
Meanwhile, the squeeze on firms eased as price inflation continued to fall, hitting a one-year low.
The strong reading defied economists, who had expected a reading of around 53.6.
The vast services sector, which spans shops to saunas and banks to buses, has driven the UK's growth through the downturn as output from factories and building sites slumped.
But May's return to growth by all three sectors – with construction expanding slightly with a 50.8 reading and manufacturing hitting 51.3 – raised hopes of a more sustained recovery.
Across the sectors, the reading for the entire private sector hit 54.3 in May – its highest reading for more than a year.
The Bank of England expects gross domestic product (GDP) to increase by 0.5% in the second quarter.
Markit economist Chris Williamson said: "The UK economy has moved up a gear with all cylinders now firing. There's good reason to believe growth can accelerate further."