The Irish services sector experienced subdued growth last month while the industry outlook is the weakest in more than four years, the latest AIB purchasing managers index (PMI) has revealed.
In the aftermath of US tariffs policy announcements and volatility in the financial markets, the 12-month outlook was the weakest since October 2020 in the face of the uncertainty.
“Firms in the Irish services sector remained optimistic on the prospects for expansion in activity levels over the coming 12 months,” AIB chief economist David McNamara said, with 38 per cent of participating companies projecting growth against 18 per cent forecasting contraction.
“However, the strength of sentiment continued to soften, falling to its lowest level since October 2020.
“Firms cited the potential impact of US tariffs, financial market turbulence and uncertainty in relation to international trade.”
The seasonally adjusted AIB Ireland services business activity index fell to 52.8 in April, from 55.3 in March, showing that services activity still expanded during the month but at a much slower pace. The index ranges from 0 to 100, with a figure above 50 showing growth.
While growth was slow, job creation in the service sector continued at a “steady pace”, which was above the long-term average.
The growth of new business and total activity increased at the slowest rates in 18 and 15 months respectively. The new businesses index underwent its largest monthly fall since January 2021.
Wages remained the principal driver of cost inflation in April, the AIB survey found, noting that average input prices increased at the weakest rate in five months and at a rate that was “broadly equal” to the overall trends in the industry.
Other sources of cost inflation mentioned in the survey were insurance, fuel, food and general supplies. Cost pressures eased in multiple sectors including in transport, tourism and leisure. The financial services sector experienced a steeper increase in cost inflation than last month and the largest overall increase.
Despite the reduction in input costs for the transport, tourism and leisure industry, the PMI found that the sector had a decrease in outstanding business for the fourth time in five months, and employment growth was weak. The sector saw a decline for the second month in a row.
