Increase in Activity Levels, Yet Forecast Remains Muted - AIB PMI Report
Servin' Up a Growth Spurt: Ireland's Services Sector Boost in May
The services sector in Ireland has seen a decent uptick in May, as per the latest AIB Purchasing Managers Index (PMI). This index rose from 52.8 in April to a zestier 54.7 last month, with anything above 50 indicating growth.
But the export growth didn't quite sizzle as much, remaining somewhat subdued. And while optimism about future activity nudged up a bit, it's still lingering in the shadows, especially with trade tensions brewing on the international stage.
The May survey data tells a tale of a partially revived services economy, but there's a lingering unease, keeping the outlook below par. Total activity and new business were on the rise, at a faster pace than April, but growth in outstanding business and employment eased a tad.
The 12-month outlook nudged up slightly from April's post-pandemic low, mirroring the lingering business uncertainty. Cost pressures eased to an eight-month low, but the increase in price inflation remained notable and above the long-term trend.
David McNamara, AIB Chief Economist, had this to say about the survey results:
"The May AIB Irish Services PMI showed an acceleration in growth in the sector, with the index jumping to 54.7 from 52.8 in April. The pick-up was due to stronger new business growth and a recovery in output expectations, but outstanding business and employment growth both slowed down. Overall, the Irish services sector's growth outperformed that of the Eurozone, UK, and US in May. However, subdued business outlooks linger as trade tensions persist."
In total, three out of the four sub-sectors expanded in May, with Transport, Tourism & Leisure being the only one to suffer a contraction compared to April. The Technology, Media & Telecoms sector remained the best performer out of the lot.
Employment growth eased during the month, with Transport, Tourism & Leisure reporting a contraction in employment for the first time since August 2024, and Financial Services registering only a slight increase.
On the inflation front, input cost pressures eased, hitting a low not seen since last September, but prices charged picked up and stayed well above the long-term average. Service sector firms remained optimistic about the prospect of expansion in activity levels over the next 12 months, but the strength of this sentiment only increased marginally from the post-pandemic low reached last month, with ongoing international trade uncertainties playing a significant role.
[1] The current state and outlook of the services sector in Ireland, as indicated by the May AIB PMI, show an acceleration in growth.[2] The services PMI rose to 54.7 in May from 52.8 in April, signaling an overall increase in business activity.[3] Despite this improvement, ongoing business uncertainty and concerns over international trade tensions kept the outlook subdued.[4] Growth in outstanding business and employment both eased during the month.[5] Cost pressures decreased to an eight-month low, but charge inflation increased and remained above the long-run trend.[6] The Irish services sector's expansion outperformed that of the Eurozone, UK, and US in May.
[1] The financial sector, a significant part of the services industry in Ireland, likely played a contributing role in the overall growth indicated by the May AIB PMI.[2] Businesses within this sector, having observed the positive growth signs, might be tempted to invest more in the near future, potentially increasing the financial activity within the services sector.
