Business activity in services increased at its slowest rate this year through June as new business rose slower than at any point since January, according to the AIB Ireland services Purchasing Managers' Index (PMI).
Business expectations continued to fall due to inflation and geopolitical instability linked to the war in Ukraine, while input prices and charges both increased at the fourth-fastest rates on record.
However, employment growth remain strong despite easing to a five-month low.
The service business activity index fell from 60.2 to 55.6 month-on-month, completing a full quarter of slowing growth and signalling the weakest increase in activity since December.
For the second quarter, the index trended at 59.2, down from 60.5 during the first three months of 2022, making for the weakest performance since the first quarter of 2021 (44.0) when the country was plunged into lockdown, although still above the long-term trend of 55.1.
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"The moderation in the main components of the survey was nowhere near as pronounced as for total business activity." said Oliver Mangan, chief economist at AIB. "Growth in new business remained strong overall, slowing only marginally, with the rate of growth in new export business unchanged."
Sub-sector data shows broad-based growth for the sixth consecutive month in June, although three sectors registered slower rates of expansion in business activity.
Weakest growth was seen in business services (52.3), followed by transport, tourism & leisure (52.8), which suffered a notable loss in momentum from May, while growth in technology, media & telecoms (59.2) was the slowest for three months. Financial services (59.5) was the the only segment not to record slower growth in June.
New business rose for the 16th successive month, albeit at the weakest rate since January, as firms reported demand being driven by the post-pandemic recovery despite concerns about inflation and Ukraine. Outstanding business grew at its strongest rate for three months.
In terms of input prices and charges, anecdotal evidence widely mentioned higher prices for fuel, wages, energy and freight, with transport, tourism & leisure recording the fastest rate of inflation on both counts and financial services the weakest.
Service providers were less optimistic in their 12-month outlook as expectations fell below the long-term trend to their lowest level since October 2020. Confidence was lowest in business services and strongest in technology, media & telecoms.
Recruitment continued largely unabated despite growth easing to a five-month lower, rising sharpest in business services and weakest in transport, tourism & leisure.
"The Future Activity Index weakened again to its lowest level since October 2020. The war in Ukraine and elevated inflationary pressures continue to weigh on the outlook for activity," said Mangan.
"Meantime, businesses continued to experience severe upward pressure on input prices, in particular, fuel, energy, freight and wage costs. This in turn saw prices charged to customers rise very sharply for the fourth consecutive month."
(Pic: Getty Images)
