Business

Inflationary picture remains ‘mixed’ for services firms despite falling input prices

AIB’s latest purchasing managers index points to further growth in April albeit at a slower pace

AIB's latest purchasing managers index points to a softer rate of job growth in the services sector last month than previous months. Photograph: Cyril Byrne

Ian Curran
Fri May 3 2024 - 05:00

Activity in the Republic of Ireland’s services sector increased in April, albeit at a slower pace than March, with inflationary pressures remaining at “historically elevated” levels, AIB has said.

The bank’s latest purchasing managers index (PMI) for services eased to 53.3 from 56.6 in March, signalling an expansion in sectoral activity in the month but at a more moderate pace than March. Any reading above 50 indicates expansion.

Based on a survey of some 400 service sector companies, the index points to a softer rate of job growth in April than previous months. Employment continued to rise across the wide-ranging sector but the pace decelerated, AIB said, particularly in the telecommunications and media subsector.

Services businesses also reported a drop in input costs despite an uptick in the number of firms that increases their prices. “The inflationary picture remains mixed in the sector,” said David McNamara, chief economist at AIB. “On the input side the rate of inflation eased for a second month running in April, but was still well above the long-run average. Wages and fuel were cited as the main sources of higher costs by respondents in April. Firms also continued to raise prices for customers, with the output price index accelerating on the month.”

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The increase in output prices reflected “strong client demand” for services in April, Mr McNamara said.

Meanwhile, business sentiment for the next three months remained “broadly positive”, he said, despite slipping to a three-month low. Companies in the Irish services sector anticipate higher business activity over the next 12 months, “linked to a range of factors including recovering market conditions, new investments, export opportunities, tourism and demand from the building industry”, AIB said.

Ian Curran

Ian Curran

Ian Curran is a Business reporter with The Irish Times

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