There was further subdued growth of the Irish services economy last month with both new business and total activity increasing at the weakest rates in just over a year.
Wages remained a key source of cost pressures, with input price inflation rising to a nine-month high, according to the latest PMI report from AIB.
More positively, employment rose solidly following January’s brief lull in hiring, and outstanding business increased. The year-ahead outlook for business activity eased from January’s 11-month high, but was strong overall and only just below the long-term trend.
The PMI data is based on a diffusion index calculated from a question that asks for changes in the volume of business activity compared with one month previously. A reading above 50 indicates an overall increase, while below 50 indicates a contraction.
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Overall activity in the sector eased for the third month running to 53.2, from 53.4 in January, signalling “solid but slower growth”, AIB chief economist David McNamara said.
The latest reading extended the current expansionary sequence to four years, but at the slowest rate since January last year. The index moved further below the long-run trend level of 55.1.
For the seventh month running, all four sub-sectors posted higher business activity. Technology, media and telecoms (54.6) recorded the fastest growth, followed by financial services (53.5), with both sectors accelerating since January.
Transport, tourism and leisure (53.4) registered much slower growth, having been the top-ranked sector in December and January. Business services (51.6) posted the slowest expansion for a year.
New business expanded further in February, extending the current sequence of growth to four years. That said, the rate of expansion slowed again to the weakest since January 2024.
Growth moderated especially in transport, tourism and leisure, as well as business services, while financial services posted a slightly faster rise in new work. International new business rose only marginally, with declines recorded in business services and financial services.
Although growth in new business eased further, the volume of outstanding work held at service providers increased at a faster pace. “This mainly reflected rising workloads in financial services and technology, media and telecoms,” Mr McNamara said.
Service providers responded to higher levels of outstanding work by boosting workforces, following a brief pause in recruitment growth at the start of 2025. The rate of job creation was the fastest in six months and broadly in line with the long-run series average.
For the first time since last November, all four sectors posted higher staffing. Technology, media and telecoms, and transport, tourism and leisure recorded the fastest increases.
The easing in growth of activity and demand was accompanied by greater cost pressures in February. Average input prices increased at the strongest rate since last May, driven mainly by wages.
Charges increased at a slightly softer rate than in January, but one that remained well above the long-run trend. Business services registered the fastest increases in both input prices and charges in the latest period.
