Irish services growth slows sharply but labor market remains healthy

Irish services growth slowed to a 17-month low in August as inflation and a weakening UK market dampened demand.

IB’s Services Purchasing Managers’ Index (PMI) fell to 54.7 from 56.3 in July as the post-lockdown recovery eased.

Any reading above 50 indicates an increase in activity.

It is the lowest reading since March 2021.

Financials posted the fastest growth rate in August, followed by technology and media, the only sector where activity grew faster than in July.

Transportation, tourism and leisure companies saw the second lowest growth rate, with business services being the last of the four sectors surveyed.

“Activity in this sector continues to expand at a solid pace, although it has lost some momentum,” said AIB Chief Economist Oliver Mangan.

“However, activity in Ireland’s service sector is holding up much better than anywhere else.”

Flash PMIs show that service sector growth stagnated in the euro-zone and turned negative in the US, while activity in the UK continued to slow.

Entry and exit price inflation in Ireland is also slowing, although half of the 400 companies surveyed reported a rise in costs in August, while Irish service providers’ prices rose for the 18th consecutive month.

Transportation, tourism and leisure businesses saw the largest increases in costs and prices.

“Companies continued to face acute upward pressure on input prices, but input price inflation fell to a six-month low,” Mr Mangan said.

“The higher costs are being passed on to customers, but similar to wholesale prices, the rate of increase in charged prices has also fallen to a six-month low.

“So there are some signs that inflationary pressures may be easing a bit.”

New business, including exports, continued to grow in August, although the pace of growth has slowed since the beginning of the year.

Pending business — the volume of uncompleted work — grew faster than in July, which may be indicative of growing demand but may also reflect staffing shortages and supply issues.

However, employment rose for the 18th straight month, although a number of companies have reported significant difficulties in recruiting new staff.

Again, employment growth in transport, tourism and leisure lagged behind other sectors.

Business confidence is still well above 50 but has weakened since July, reflecting concerns about a potential recession and inflationary risks, AIB said.

Still, services activity is more buoyant than manufacturing, where the PMI fell to 51.1 in August from 51.8 in July. This is the lowest value in almost two years.

The survey of around 400 service companies includes consumer goods, transport, information, communication, finance, insurance, real estate and business services.

This does not include retailers. Irish services growth slows sharply but labor market remains healthy

Fry Electronics Team

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