Irish services activity grows in August but 12-month outlook softens

Irish services activity continued to rise solidly in August, according to the latest purchasing managers index (PMI) published by AIB.
Growth of new business and employment accelerated last month, while the level of outstanding work increased at the strongest rate in nearly a year. Still, the overall 12-month outlook was the weakest since November 2022.
The transport, tourism and leisure sectors rebounded, but growth slowed sharply in financial services.
Input price inflation, meanwhile, was little changed in June and July, while prices charged by service providers rose at the slowest rate since April 2021.
The index gave a reading of 53.8 in August, up from 53.6 in July, and remaining above the 50 threshold which signifies an expansion in activity.
“This signals a slight acceleration in the pace of growth in the sector but, remains below the long-run average of the survey [which is 55.1],” said David McNamara, AIB chief economist.
The rate of growth in the Irish services sector remained faster than the euro zone and UK flash PMIs, both at 53.3, but below the US services PMI at 55.2.
“Overall, Irish firms reported accelerating growth in new business, and this was linked to domestic and international demand. The volume of outstanding work also rose at a faster pace on the month,” Mr McNamara said.
“The survey shows gains in all four sub-sectors covered by the survey for the first time in three months. Notable in the August survey was the sharp bounce back in activity in the transport, tourism and leisure sector, following several months of contraction, while the growth in financial services eased markedly following a period of rapid expansion in recent months.”
Although employment grew overall and at its quickest pace since February, the transport, tourism and leisure sectors continued to shed jobs during the month.
“Input cost inflation remained at a high rate in August, and the pace of increase ticked up marginally on the month. Wages, fuel and utilities costs were cited as the main sources of higher costs by respondents. Firms also continued to raise prices for customers, but the output price index eased significantly to its weakest rate of growth since April 2021,” said Mr McNamara.
Business sentiment about the prospects for activity over the coming 12 months remained broadly positive, but expectations moderated across most sectors, with the future activity index softening to its weakest level since November 2022.