Friday, December 7, 2012

7/12/2012: Irish Services Index - October 2012

The latest data on Services Sector activity in Ireland for october 2012 is very encouraging and reflective of the underlying growth signaled by previous PMI in Services readings.

Headline CSO-published monthly Services Activity Index for non-financial services in Ireland rose 3.8% m/m in October (after weak -2.4% m/m reading in September) and is now standing at 107.0 - an all-time high. Note, data for these series runs only from October 2010. Year on year the index is now up 10% on October 2012, the first time annual rate of growth hit double-digits expansion in series history. 

Removing some of the volatility, 3mo MA is now at 105.3 - the highest it has ever been. Solid upward push well beyond the already upward-sloping trend is very encouraging. 3mo MA in 3 months through July 2012 was 105.0 - also strong reading, especially compared to 98.7 3mo MA through October 2011.

Growth rates are impressive: 3mo average growth rate through October is 6.7% on annualized basis, ahead of 6.1 reading for 3mo average through July 2012 (although m/m rate is 0.63%, well below previous 3mo average of 1.2%).

Decomposition by sub-sectors is also solidly expansionary:
  • Wholesale and Retail Trade index rose to 115.3 in october, up 6.2% on September (following m/m fall-off of 2.6% in September) and up 10.5% y/y - the fastest pace of annual expansion in series history. 3mo MA is at 111.8 ahead of 3mo MA through July 2012 which stood at 110 and well ahead of 3mo MA through October 2011 (104.7). Average monthly rate of growth remained 1.33% in August-October, same as in May-July 2012. Annual rate of expansion based on 3mo MA series is now at 6.8% well ahead of 6.2% recorded for 3mo through July.
  • All of activity in the wholesale and Retail Trade came in from Wholesale Trade side, with Wholesale Trade index rising to a historic high of 128.7 (+8% m/, and +15.4% y/y). Wholesale activity was booming, which might be a net positive to the holidays sales season. 
  • In ICT services, activity rose 1.2% m/m and 6.5% y/y to 107.7. This only partially reversed the contraction of 2.8% m/m recorded in September 2012. The annualized rate of growth in the sub-sector slowed down to 6.5% in october from 7.3% in September. Thus, 3mo MA series are less impressive in dynamics: 2012 3mo MA through October stood at 107.9, down on 111.3 3mo MA for period through July 2012, but still well ahead of the 3mo MA through October 2011 (101.7). 
  • The sector is pivotal to our exports and the fact that annualized rate of growth fell to the 3mo MA of 6.1% in August-October compared to 12.5% for the 3mo period through July 2012 is a bit of a concern. Still, I am happy to take 6.1% growth in the current global environment.
  • Business Services index rose to 107.8 in October, the highest reading on record, with m/m growth of 6.3% (fully reversing the slide of 1.2% recoded in September). Year on ear the series up 10.7%. 3mo MA series are showing similar performance to the core index: 3mo MA through October is at 104.5, slightly up on 3mo MA through July 2012 (104.0) and significantly up y/y (100.5 recorded in 3mo through October 2011). Surprisingly, Business Services activity m/m expansion rate has slowed down over the last 3 months from the average of +2.3% m/m in May-July 2012 to an average of +0.9% in August-October. However, annual rate of expansion picked up from +0.4% in 3mo through July to +4.2% in 3mo through October.
  • Transportation and Storage sector activity rose marginally from 113.0 in September to 113.4 in October. The sector failed to recover from a 1% m/m slide in September, gaining just 0.4% m/m in October. However, annual rates of growth in the sector are now running at double digits for 7 consecutive months and the rate of expansion has accelerated to 17.6% in October 2012, marking the fastest annual rate of growth in the sub-index history.
  • Accommodation and Food sector activity slipped for the second month in a row. 3.1% m/m drop in September was followed by a 0.3% slip in October. 3mo MA for the index is now at 91.6, against 3mo MA through July of 89.4 and 3mo MA through October 2011 of 87.8. The sector has been a major disappointment in terms of activity since the start of the series.
  • Other Services also showed persistent weakness in recent months - the fall m/m in the subindex of 0.8% in September was moderated by a rise of 0.7% in October, but overall the index is a relative laggard in the entire Services group, performing worse than even Accommodation & Food. 

So on the net, very robust index performance for Services sector activity, with good strengths in terms of 3mo MA trends in Wholesale Trade, Business Services, and Transportation & Storage, relatively steady performance in ICT services and continued weaknesses in Accommodation & Food and Other Services sub-sectors.

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