Growth in the State’s services sector fell to a near three-year low in January, signalling a “slowdown in the rate of expansion in business activity”, according to AIB.
AIB’s latest purchasing managers index for services fell from 53.2 in December to 50.5 in January, showing that growth in the sector last month was only marginal, and was the slowest in the current sequence of growth that began in March 2021.
Compiled from a survey of around 400 service sector companies by S&P Global on behalf of AIB, a reading above 50 on the services PMI index indicates overall growth in the sector, and below 50 an overall contraction.
David McNamara, chief economist at AIB, noted that at a sectoral level “divergences in activity were clearly evident”.
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“Two of the four sub-sectors covered in the survey registered growth overall, led by strong growth in financial services, with business services and transport, tourism and leisure seeing monthly declines,” he said.
Irish service providers continued to report rising levels of new business in January, but the pace of growth eased to the second weakest in 13 months.
Financial services continued to buck the wider trend with the strongest expansion in six months, while new business fell in transport, tourism and leisure.
The relatively weak increase in new work in January was reflected in firms completing outstanding business. The volume of work-in-hand fell for the first time since February 2021, with a sharp decline in technology, media and telecoms.
Mr McNamara highlighted “one bright spot”, being that new exports order growth accelerated at the fastest pace in five months in January.
Service providers continued to expand their workforces in January as the rate of job-creation picked up from December’s 34-month low despite a sharper fall in transport, tourism and leisure.
Inflationary pressure rose in January, with both input prices and charges for services rising at their fastest rates since June. Labour costs were the main source of overall inflationary pressure, especially in financial services, although service providers also reported higher freight costs for items linked to the shipping crisis in the Red Sea.
“The rate of input price inflation picked up for a second consecutive month, with firms reporting higher labour costs as the main source of inflation. These higher operating costs were passed on to customers, with prices charged for services rising at their quickest pace in seven months,” said Mr McNamara.
Looking ahead Irish service providers remained relatively upbeat in terms of activity forecasts for the next 12 months, with sentiment little changed from December’s seven-month high.
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