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Ireland's service sector reported a continued expansion in activity in August but growth slowed to a 17-month low, partly as a result of inflation and weaker UK markets.
Data from AIB and S&P Global showed that the Services business activity index fell to 54.7 in August from 56.3 in July, below the trend level of 55.1 since March last year.
Rates of expansion slowed in sub-sectors, such as in Financial Services, recorded the weakest expansion in 15 months. But new business growth remained slightly strong than the expansion in total activity, resulting a faster increase in work outstanding in August.
The August data also demonstrated a further moderation in demand conditions for Irish service providers. The level of new business continued to increase, but the rate of growth slowed for the sixth month running to the weakest since March 2021, partly due to inflation and weaker UK markets.
On Thursday, AIB Ireland manufacturing purchasing managers' index fell to 51.1 points in August from 51.8 in July.
As a result, the seasonally adjusted Ireland Composite Output index fell to 51.0 in August from 52.9 in July, indicative of the weakest rise in output in the current 18-month expansionary sequence.
A slower increase in services activity and a sharper reduction in manufacturing output resulted in the loss of growth momentum in August. Notably, goods production fell for the third successive month and at the fastest rate since February 2021.
Looking ahead, full-year outlook has been moderated, which reflects concerns over high inflation and a potential recession.
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‘, said Oliver Mangan of AIB.
He added: Growth was broad based across all the four sub-sectors 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.’
The AIB Ireland Services PMI is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 service sector companies. Data were collected August 12 to 25.
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