Service sector activity in Ireland continued to increase in August, but the rate of growth slowed for the fourth time in five months as new business inflows continued to lose momentum, new data shows.
The latest PMI data from AIB shows the 12-month outlook also moderated, reflecting concerns over high inflation and a potential recession.
More positively, the rates of inflation in both input and output prices hit six-month lows, and employment continued to expand at a solid pace.
The services business activity index fell for the fourth time in five months to 54.7 in August, from July’s 56.3. A reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease.
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The latest figure signalled an 18th consecutive monthly increase in services output, albeit at the weakest rate since March 2021 as the sector reopened from lockdown. The index was also below its long-run trend level of 55.1 in the latest period.
All four sub-sectors registered growth of activity in August, although rates of expansion slowed in three categories.
Financial services (56.6) led the rankings for the third straight month despite recording the weakest expansion for 15 months. Technology, media and telecoms (55.4) was the second-strongest performer and the only sector to see a faster increase than in July.
Growth slowed in transport, tourism and leisure (54.8), but remained higher than the sector’s long-run trend expansion. Business services (52.2) lagged the other sectors with the slowest increase in activity in the current 18-month upturn.
August data signalled a further moderation in demand conditions for Irish service providers. The level of new business continued to increase, but the rate of growth slowed for the sixth month running to the weakest since March 2021.
Slower demand was partly linked to inflation and weaker UK markets. The financial services sector registered a notable slowdown in growth of new contracts. Meanwhile, overall new export business at service providers rose at the slowest rate since January.
Although easing since July, new business growth remained slightly stronger than the expansion in total activity, resulting in a faster increase in work outstanding in August.
The strong rise in incomplete business also reflected staff shortages and supplier delays, according to survey respondents. Pressure on business capacity was most evident in the financial services and transport, tourism and leisure sectors.
Rising levels of outstanding work underpinned confidence around the 12-month outlook in August, which also reflected firms’ planned development of new services and a continued recovery from Covid restrictions.
That said, overall sentiment weakened since July, reflecting rising recession and inflation risks. Cost pressures remained high in August, especially in the transport, tourism and leisure sector. The rate of overall input price inflation eased to a six-month low, but was still the ninth-highest on record.
Similar to the trend for input prices, the rate of charge inflation slowed to a six-month low but was still the seventh-highest since the series began in 2000. Service providers continued to expand their workforces in August.
The rate of job creation was broadly in line with the trend for the current 18-month sequence of growth, and above the long-run survey average.
