Business

Pace of services sector growth slows in June

Demand for services in Ireland kept rising in sixth month of year, a steady trend since March 2021

'Irish firms continued to report rising levels of new business, and this was linked to domestic and international demand, albeit at a slower pace than in May,' says AIB chief economist David McNamara. Photograph: Dara Mac Dónaill

Fiona Keeley
Wed Jul 3 2024 - 01:01

Growth in the Irish services sector eased in June as new business rose at the slowest rate, according to the latest AIB Purchasing Managers’ Index data. It comes as news that business input prices increased at the slowest rate since February 2021.

Activity in the financial services sector was the strongest, registering 57.6 with the technology sector coming in behind it at 56.2. Business services had the strongest increase in the last few months at 54.4. The index scale measures between 0 and 100; a number above 50 shows growth while a number below 50 indicates a decrease in economic activity, in comparison to the previous month. The tourism sector registered 47.2, its first decline since February 2023.

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“Overall, Irish firms continued to report rising levels of new business, and this was linked to domestic and international demand, albeit at a slower pace than in May,” AIB chief economist David McNamara said. “The volume of outstanding work also rose again on the month, but performance varied across sectors.”

“Business sentiment about the prospects for activity over the coming 12 months was positive but the index slipped to a 14-month low. Rising customer demand and expected lower interest rates were again mentioned as sources of optimism for the coming year.”

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Demand for services increased in June, continuing a trend since March 2021. However, new business rose more slowly in June but businesses reported a positive outlook over the next 12 months. Economic recovery, lower interest rates, new products and expanded sales teams, as well as business from the US and UK were mentioned as potential sources of income. However, the mood among businesses was at its weakest since April 2023.

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Widening the customer base and increased competitiveness were factors in driving new business. However, the growth rate in the latest period was the weakest since January. Despite the slower growth in new business, the level of unfinished work continued to rise in June, something that was noticeable in the financial sector.

Employment had the weakest rise in over three years, according to the data. The reluctance among businesses to recruit more staff might explain the level of uncompleted work as we reach the halfway point of the year. Three sectors reported a slower growth in the workforce than in May, while the tourism sector posted a further decline in staff levels.

Output in the private sector was broadly unchanged in June following seven consecutive months of growth. This development reflects the slower rise in service activity and the faster decline in manufacturing production.

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