Tech slowdown fails to retard services sector growth

“Buoyant” demand for Irish service providers underpinned a strong month for the sector despite a continuing decline in business activity within the technology, media and telecoms industry, AIB figures published on Wednesday indicate.

The bank’s latest services sector purchasing managers’ index (PMI) shows the overall services sector here expanded again last month, assisted by strong growth in financial services.

Based on a survey of about 400 services industry companies, AIB’s headline index gave “another very strong reading” of 56.8, the bank said, with any reading above 50 indicating an increase in activity within the sector. Although down slightly from May’s reading of 57, AIB chief economist Oliver Mangan said the data is “consistent with a continuing robust rate of growth”, with Ireland outperforming major advanced economies, including the UK and the US in the month.

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Services business reported an increase in domestic and external demand, underpinning a sharp rise in new business volumes, Mr Mangan said. Employment across the wider sector also expanded again in June, spurred on by increased output levels and expanded order books.

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Among the four subsectors included in the data, financial services were the strongest performer “in terms of both output growth, for the first time in eight months, coinciding with a notable increase in new business”, Mr Mangan said.

At the outset of the peak summer season, the travel, tourism and leisure subsector also expanded in June, albeit at a slower pace than in June. AIB said the level of outstanding work within the subsector fell for the first time since February while the rate of job creation slowed to a three-month low. Selling prices, meanwhile, declined for the first time since February 2021.

‘Growth momentum’

Technology, media and telecoms maintained their laggard status in June, experiencing a further decline in momentum against the backdrop of the global tech slowdown.

While activity in the sector expanded, it did so at its slowest pace in eight months, AIB said, suffering “another notable loss in growth momentum” despite a pick-up in the rate of new business. Companies reported that selling-price inflation picked up notably in the month.

In the overall sector, Mr Mangan said inflationary pressures remained elevated. Both input and output prices were notable for a “reacceleration in their pace of growth” last month.

AIB’s services sector PMI has registered an expansion in business activity each month since March 2021.