Irish services economy expands at faster rate in January as Covid restrictions ease

Outlook among businesses more optimistic as Omicron threat recedes

Activity in the Irish services sector picked up in January as confidence was boosted by the lifting of Covid-19 restrictions, the latest purchasing managers' index (PMI) from AIB shows.

Both new business and total services activity expanded at faster rates last month than they did in December, while expectations for the year ahead were at their highest since last May.

There was even a renewal of growth in the transport, tourism and leisure sector, driven by the domestic market, as Irish people reacted to the Government’s easing of public health restrictions on January 21st.

Cost pressures remained “elevated” for businesses, but the rate of input price inflation eased to a six-month low, while charges increased at the lowest rate since last September.

The services business activity index rose to 56.2 in January, which is up from a reading of 55.4 in December and above the 50 threshold, below which signals a contraction in activity. The acceleration in activity follows a period of slowing growth in the second half of 2021.

Strongest expansion

The strongest expansion was seen in business services, followed by financial services and then the technology, media and telecoms sector. The transport, tourism and leisure sector was the slowest grower and the only one of the four not to create jobs during the month.

The Irish trend was in contrast to the pattern in other countries, where the spread of the Omicron variant of coronavirus had continued to weigh on activity, said AIB chief economist Oliver Mangan.

“Despite a further strong rise in employment, the level of outstanding business in the services sector rose further in January. This was partly linked to staff absences due to Covid and ongoing supply chain difficulties at a time when demand was strengthening,” he said.

“Meanwhile, firms in all sectors remained very optimistic on the 12-month outlook for business, with activity expected to pick up further momentum as the pandemic recedes.”

Laura Slattery

Laura Slattery

Laura Slattery is an Irish Times journalist writing about media, advertising and other business topics