Backlogged work in services sector rises at highest rate for 21 years

PMI data shows inflationary pressures continued to build in October

Services sector: continuing to rebound with the lifting of pandemic restrictions.

Services sector: continuing to rebound with the lifting of pandemic restrictions.


Work backlogs in the Irish services sector rose at their highest rate in October for more than 20 years, according to the latest PMI data from AIB.

The data shows the sector continued to expand rapidly at the start of the final quarter of the year. Growth rates for activity and new business remained stable at elevated levels. Employment “continued to rise sharply”, and the 12-month outlook “remained strong”.

However, inflationary pressures continued to build – mirroring figures for manufacturing earlier this week – with average input prices rising the most since late 2000 and charges increasing at the third-fastest rate on record.

The Services Business Activity Index registered 63.4 in October, down only fractionally on 63.7 in August and September and “indicating another rapid expansion in Irish service sector output at the start of the final quarter”.

A reading above 50 indicates expansion. The current sequence of growth now stretches to eight months as the sector continues to rebound with the lifting of pandemic restrictions.

Transport and leisure

The transport, tourism and leisure sector (65.3) overtook financial services (64.9) as the fastest-growing subsector in October, and has been the strongest of the four monitored sectors three times in the past five months.

Elsewhere, growth accelerated in technology, media and telecoms (63.1) but eased to a four-month low in business services (61.4).

The volume of incoming new business expanded rapidly in October, attributed to improving consumer demand as more businesses reopened with the further easing of restrictions.

The rate of expansion eased slightly since September but was among the fastest registered over the past six years. Demand growth was strongest in the transport, tourism and leisure sector.

New business from export markets also rose sharply, linked to online activity and business opportunities arising from Brexit.

Pressure on service sector business capacity “scaled new heights” in October. Outstanding workloads increased the most in any month over the past 21 years, and for the eighth consecutive month. The fastest increases in incomplete business were again registered in the technology, media and telecoms, and financial services subsectors.

Staff levels

Capacity pressures were again addressed by an increased workforce. Employment at service providers rose for the eighth successive month, and at one of the fastest rates in the past three years.

Higher staff levels were broad-based by subsector, with the strongest recruitment in October seen in the business services sector.

Irish service providers remained strongly optimistic regarding the forthcoming 12 months of trading. Overall expectations for activity were the softest since July, but still greater than the long-run survey average.

Confidence was linked to a return to “normal trading conditions” with the lifting of pandemic restrictions and as the economy adjusts to the impact of Brexit, as well as long-term investments in new products and markets.

The rate of input price inflation accelerated for the sixth consecutive month to the highest since November 2000. Cost pressures were linked to a wide range of sources including fuel, freight charges, wages (especially for drivers), insurance, electricity, customs and Brexit.

In response to soaring costs, service sector charges were increased at the third-fastest rate on record.