According to the AIB Purchasing Managers' Index (PMI) survey data for August 2022, service sector activity in Ireland continued to increase in August, however, the rate of growth slowed for the fourth time in five months as new business inflows continued to lose momentum, and the 12 month outlook also moderated, reflecting high inflation and potential recession concerns, but, more positively, the rates of inflation in both input and output prices hit six month lows and employment continued to expand at a solid pace.
AIB stated that the Services Business Activity Index fell for the fourth time in five months to 54.7 in August from 56.3 in July.
Transport, Tourism And Leisure
According to AIB, growth slowed in transport, tourism and leisure (54.8), but stayed higher than the sector's long-run trend expansion, and pressure on business capacity was most evident in the financial services and transport, tourism and leisure sectors, with input prices increasing the most in transport, tourism and leisure and financial services, which both posted faster inflation rates than in July.
AIB also stated that cost pressures remained high in August, particularly in the transport, tourism and leisure sector, and transport, tourism and leisure registered the fastest rise in charges among the four sub-sectors monitored for the ninth month running.
Additionally, AIB stated that the transport, tourism and leisure sector experienced an activity increase at a rate that broadly matched that that was seen across the service sector as whole in August, and growth stayed much weaker than the trend for 2022 today, however, as did the expansion in new business.
Unlike the trend for services as a whole, transport, tourism and leisure sector input price inflation accelerated to a two-month high and was the strongest among the four sectors monitored, as was the charge inflation rate, despite easing since July.
Statement By AIB Chief Economist
AIB chief economist Oliver Mangan stated, "The AIB Irish Services PMI for August showed activity in the sector continues to expand at a solid pace, though it has lost some momentum. The Business Activity Index fell to 54.7, which is the lowest reading since March 2021 and down from 56.3 in July and 55.6 in June. Activity in the Irish services sector, though, is holding up much better than elsewhere; the flash Services PMIs fell to 50.2, 52.5 and 44.1 in the Eurozone, UK and US, respectively, in August.
"Growth in new business at Irish services firms remained strong, although it slowed for the sixth month running. Meantime, new export business was the weakest since January. Firms attributed the slowing demand to rising inflation and weaker UK markets. Nevertheless, there was another significant increase in backlogs of outstanding business indicating that demand, though softening, remains quite strong. There was also a further marked rise in employment, continuing the trend evident year-to-date.
"Growth was broad based across all the four subsectors covered in the survey, although, business services lagged the others. Encouragingly, new business growth remained solid in all four sectors. Meanwhile, overall business confidence in services, though still quite positive, weakened somewhat from July reflecting concerns about rising inflation and a potential recession.
"Firms continued to experience acute upward pressure on input prices, but the rate of input price inflation eased to a six-month low. The higher costs are being passed on to customers, but similar to input prices, the rate of increase in prices charged also fell to a six-month low. So there are some signs that inflationary pressures may be starting to moderate somewhat."
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