Growth in service sector picked up in February
Ireland’s service sector gained further momentum midway through the first quarter of the year, the latest AIB Services Purchasing Managers’ Index (PMI) survey data has revealed. Its findings mark two consecutive years of monthly improvements in business activity, new business, and employment.
Firms were subsequently more optimistic about their future and registered the strongest degree of confidence in a year. Cost pressures eased but charges were hiked at a faster rate.
The Services Business Activity Index reached 58.2 in February, up from 54.1 in January. Readings above 50 indicate overall growth in activity and below 50 an overall decrease.
Reportedly, the latest uplift in activity levels was largely a reflection of firmer demand conditions. Inflows of new business rose further midway through the first quarter of the year and at the steepest pace since last July. Demand also improved in international markets, as highlighted by a sustained and strong upturn in new export business.
“The AIB Irish Services PMI posted a strong increase in February for the third month in a row,” said Oliver Mangan, AIB chief economist. “The Business Activity Index climbed to 58.2 from 54.1 in January, 52.7 in December and 50.8 in November. This is the highest reading since May and points to a robust rate of growth in services activity in February. It is also well above the flash February Services PMI readings for the Eurozone, UK and US of 53.0, 53.3 and 50.5, respectively.
“A further marked rise in new business volumes in Irish services firms was registered in February, including in new export business, reflecting improving demand conditions both at home and abroad. This resulted in another significant increase in backlogs of outstanding business. There was a further rise in employment, but at a modest pace, amid reports of difficulties in sourcing staff. Meanwhile, firms’ confidence about the outlook for the next 12 months rose for the third consecutive month to its highest level in a year.
“A very strong expansion in activity and robust growth in new business was recorded in three of the four sectors covered in the survey -Technology/Media/Telecoms, Financial and Business Services. Meanwhile, after five months in decline, there was a stabilisation in activity levels in the Transport/Tourism/Leisure sector, with good growth in new export business.
“Inflationary pressures remain strong in the services sector. Businesses continued to report upward pressure on wages, as well as transport and energy costs, though the rate of increase in input prices eased somewhat further to a 20-month low. Meanwhile, higher costs continue to be passed on to customers, with the rate of increase in selling prices re-accelerating in the month.”