Services sector reports difficulties sourcing and retaining staff

Latest PMI data from AIB signals tentative improvement in face of inflationary pressures

Employment across the Irish services sector rose to its highest level in three months in March amid difficulties in sourcing candidates and challenges retaining current staff, according to AIB.

The bank’s latest purchasing managers’ index (PMI) data pointed to a slight softening in the upturn across the sector during the month, with moderation also in rates of increase in activity and new business.

The year-ahead outlook for output fell to its lowest level in three months and was below its long-run average.

There were some tentative signs of improvement on inflationary pressures as rates of input-price and output-charge inflation eased to 21- and 18-month lows respectively, but they were still substantial in the context of historical data.

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When listing the key sources of inflation, firms continued to mention rising energy costs and sustained wage pressures. As a result, companies raised their own selling prices to reflect the increases in operating expenses.

The overall PMI reading stood at 55.7, down from 58.2 in February, but a 25th successive monthly improvement in business activity across the sector. A reading above 50 indicates growth while a reading below that points to contraction.

While firms continued to hire during the month to accommodate increasing workloads and higher activity, the rate of job creation was softer than that seen throughout 2022.

Amid hopes of an improvement in demand over the coming 12 months, firms remained mostly upbeat in their projections for output growth for the year ahead. However, some companies were reportedly cautious about the longevity of the current upturn as the degree of confidence slipped to the weakest in three months.

While weaker than the expansion seen in the previous survey period, the uplift in activity in the sector remained elevated by historical standards and was strong overall.

Intakes of new business increased steeply, but at a slightly slower pace than in February. Growth in demand from overseas clients was also sharp with the most pronounced rise in new export business since October. Notably, having quickened from February, the pace of backlog accumulation was strong by historic standards and the fastest in five months.

The data also highlighted that transport, tourism and leisure firms joined their sector counterparts in reporting expanding output in March, which marked the first time since last August that all four of the monitored industries registered growth.

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter