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Services sector growth eases in Feb

Tuesday, March 05 07:57:10

Ireland's services sector grew at its slowest rate in six months in February but business expectations point to another uptick in activity this year, a survey showed today.

Ireland, which received an 85 billion euro EU-IMF bail out over two years ago, has avoided the recession gripping much of Europe thanks to sturdy exports. The government expects the economy to expand by 1.5 percent this year.

The NCB Purchasing Managers' Index (PMI) of activity in the services sector, which accounts for roughly 60 percent of the Irish economy, eased back to 53.6 from January's five-year high of 56.8. But the index remained well above the 50 line that separates growth from contraction.

Growth in new export orders also eased after two months of blistering expansion, with the sub-index pulling back to 56.7 from peak growth levels of 63.5 seen in January - the highest rate since the poll began in June 2002.

"There was a moderation in the pace of growth in exports during February, however, this must be considered in the context of January's outturn, which represented the fastest growth rate in the history of the series," said Philip O'Sullivan, chief economist at NCB Stockbrokers.

Despite a struggling domestic economy mired in high unemployment and relentless austerity, businesses forecast activity to be higher in 12 months' time than current levels, with expectations gathering pace for the second successive month.

Companies have reduced their prices charged in each month since August 2008, as a mismatch in input and output prices weigh on profitability in the sector.

A separate survey last week showed that manufacturing sector activity gained pace in February from a nine-month low, standing Ireland in stark contrast to the contraction in factory activity for the euro zone as a whole.

Other data released last week showed that Ireland's unemployment rate fell to a two-year low of 14.2 in the fourth quarter of last year, boosting hopes that the struggling domestic economy may soon begin to recover.