Pick-up in services activity points to improved demand conditions

After six months of faltering growth, activity in the State’s dominant services sector picked up in November, suggesting demand conditions in the Irish economy have improved.

AIB’s latest purchasing managers index (PMI) for services registered a reading of 54.2 in November, up from 52.6 the previous month. Any figure above 50 indicates expansion.

The latest reading ended a six-month period of “slowing expansion”, the bank said while noting it was still the second-lowest reading since January and below the long-run trend level of 55.1.

AIB said the rates of expansion in total activity and new business both accelerated in November for the first time since April, with a notable rebound in the transport, tourism and leisure sector.

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“Employment rose at a solid pace in a tight labour market and wages remained a key source of rising costs,” the report said. Input price inflation, however, eased further and was broadly in line with the long-run survey trend.

AIB noted that growth over 2023 as a whole was set to be slower than in 2021 but stronger than in 2019 prior to the disruption from the pandemic.

In November, all four sub-sectors registered higher activity over the month. Growth was again fastest in technology, media and telecoms sector (57), although transport, tourism and leisure (56.7) recorded the biggest improvement since October with the first expansion since June.

“The Irish November survey data are encouraging on a number of fronts; there was a strengthening in the key activity metrics, all four service sub-sectors registered growth, while inflationary pressures continued to ease,” AIB chief economist Oliver Mangan said.

“Employment growth also picked up in the month and the level of outstanding work rose again. Firms also remained optimistic about their expectations for business activity over the coming 12 months,” he said.

“Of particular note was the acceleration in growth in new business for the first time since April and renewed rise in new export business after it had declined in October. This points to an improvement in demand conditions. Notably, there was a marked rebound in activity in the transport/tourism/leisure sector, following a four-month downturn, helped by a strong increase in new business, including from overseas,” Mr Mangan said.