The rate of growth in Ireland’s services sector has rebounded slightly from April’s lows but remains below the long-term average, the latest AIB purchasing managers index (PMI) has revealed.
Optimism levels in the sector barely recovered from last month’s post-pandemic low, with firms pointing to ongoing economic uncertainty caused by trade war fears.
The seasonally adjusted AIB Ireland services business activity index rose to 54.7 from 52.8 in April.
“The uptick was driven by stronger new business growth and a recovery in output expectations, albeit outstanding business and employment growth both eased,” AIB chief economist David McNamara said.
This rate of growth is well ahead of the euro zone, which at 48.9 experienced a slight decline in business activity, as well as the UK and US, which both saw mild growth in the sector at 50.2 and 52.3 respectively. The index ranges from 0 to 100, with a figure above 50 showing growth.
The transport, tourism and leisure industry was a drag on the overall sectoral index, registered a third successive monthly decline in activity at 47.0, the fastest rate of decline since October 2023. However, growth in the remaining subsectors outweighed that decline.
The technology, media and telecoms sector recorded the fastest expansion of business activity in May at 59.1, followed by business services (56.0) and financial services (54.2).
This trend was largely matched in the employment indicators, the transport, tourism and leisure sector posted a decline in staffing for the first time in 2025, while the financial services area reported mild growth.
“On the inflation front, input cost pressures eased further to the slowest rate since last September,” AIB’s chief economist noted, “but prices charged picked up and remain well above the long-term average”.
Companies reported labour costs as the primary inflationary pressure, alongside insurance and fuel costs. While companies reported a higher level of input price inflation, the prices charged to customers saw a lesser rate. Despite this, the sector has seen consecutive price increases every month since March 2021.
The rate of new business growth improved in May, following a drop in April, but the new business index remains below its long-run average. Contributing to that regrowth was new work from international clients which rose slightly in the month.
Optimism levels in the sector recovered minimally after a stark decrease in April. While firms highlighted trade disruptions as cause for concern, the 12-month outlook was kept positive overall by confidence from investment, new services, AI innovation, larger sales teams and tourism. This sense was strongest in the financial services subsector and weakest in business services
