Irish services activity grows at fastest rate since 2016

Total activity in the Irish services sector rose in June at the fastest rate in more than five years as lockdown restrictions continued to be eased and more parts of the economy reopened, according to AIB.

The AIB purchasing managers’ index (PMI) rose to 63.1 in June from 62.1 in May, the fastest rate of growth since January 2016, and marked the fourth successive month in which the index was above 50. A figure above 50 indicates increased activity.

The 12-month outlook “remained strongly positive as firms expect a continued recovery from the pandemic”, AIB said, adding, however, that “less positively, input price inflation reached the highest in nearly 13 years”.

Over the second quarter as a whole the index trended at 61.0, a marked turnaround from the lockdown-influenced 44.0 reading for the first quarter.

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The strongest rate of growth for June was signalled in transport, tourism and leisure sectors, where the combined sub-index stood at 71.2, which almost equalled the record rate of expansion set in September 2000.

“The surge in demand for services continued in June, with new business increasing for the fourth month running and at the fastest rate since January 2016,” AIB said. “Firms reported new work linked to business reopenings and the lifting of lockdown restrictions.”

Data indicated that domestic demand remained the main growth driver, as new export business continued to increase more slowly than total new work.

However, the rate of input price inflation accelerated for the fourth time in five months to the highest since July 2008. Fuel, wages, insurance, utilities, freight and Brexit-related costs were all reported to have risen during the month, AIB said.

“Companies continued to pass on higher costs to end customers in June, with average prices charged rising at the fastest rate since November 2018,” it said.