Service sector records sharp uptick in business activity

Sentiment in the sector is at its highest since January

Dublin’s main financial services area. The AIB Ireland services purchasing managers index showed businesses recorded a sharper workforce expansion as a result of improved demand. Photograph: iStock

Dublin’s main financial services area. The AIB Ireland services purchasing managers index showed businesses recorded a sharper workforce expansion as a result of improved demand. Photograph: iStock

 

Ireland’s service sector saw business activity expand sharply in May as the rate of new order growth rose to a five month high, according to a report compiled for AIB.

The AIB Ireland services purchasing managers index (PMI) showed that businesses recorded a sharper workforce expansion as a result of the improved demand.

In addition, the outlook for the coming year was positive, with sentiment rising to the highest since January with expectations of stronger future economic conditions.

While manufacturing PMI dipped in May, services PMI rose to 57 from 54.7, “suggesting that the Irish economy is continuing to expand at a good pace”, according to AIB chief economist Oliver Mangan.

“It is also encouraging that business confidence in the services sector in May about the outlook for the year ahead, rose to its highest level in four months.”

At sector level, business services companies registered the fastest rise in business activity while the transport and leisure sector indicated a fall in business activity.

Unfinished orders

Volumes of new work from abroad also rose during the month and at the fastest pace since the start of 2019. An improvement in demand from the UK, European and Middle Eastern markets was attributed as causing the growth.

As a result of this, “volumes of unfinished orders rose at their fastest rate since July 2018 as backlogs increased amid growing capacity constraints,” Mr Mangan said.

There were, however some challenges with input price inflation rising to a three month high in May, driven by greater fuel and staff costs. Output charges also rose in the month.

AIB’s indicator is compiled by IHS Markit from responses to questionnaires sent to a panel of about 400 service sector companies.