Activity in the services economy grew at an accelerated rate in July, driven by a sharp increase in inflows of new business, according to the latest AIB Ireland Services PMI.
Business confidence has ticked up to a three-month high on the back of hopes for a sustained upturn, and the rate of cost inflation has eased from recent peaks, although it remains elevated, leading companies to raise their prices last month.
The services business activity from 55.6 in June to 56.3 in July, signalling the 17th consecutive monthly rise in services input, with a reading of 50.0 indicating no change from the previous month.
Oliver Mangan, chief economist at AIB, said the reading points to "continuing strong growth in services activity. By comparison, the flash July Services PMIs fell in the eurozone, UK and US to 50.6, 53.3 and 47.0, respectively, which are well below the Irish reading.
"In terms of the main components of the Irish survey, growth in new business remained strong, with the rate of increase in new export business picking up to a fourmonth high amid stronger client demand.
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"As a result, July registered another significant increase in backlogs of outstanding business as pressure on capacity rose further. Meanwhile, there was yet another marked rise in employment, continuing the trend evident in the first half of the year."
Growth was broad-based across the four monitored sector in July, with technology, media & telecoms (51.4) the only sector to register a weaker upturn compared to the previous survey period.
Business services recorded the strongest expansion in activity at 55.6, but activity also accelerated at a sharp pace in transport, tourism & leisure (56.2), and financial services (61.9), where growth was at its fastest since April.
Another uplift in new business inflows to Irish services firms underpinned the overall improvement, but the expansion was the weakest measured since January.
According to the 500 panellists in the services sector, improving client demand both domestically and abroad drove the rise, with new business growth strongest in financial services and weakest in transport, tourism & leisure.
Companies continued to hire in July to help them handle increased workloads and a strong pipeline of new business, and the rate of job creation reaccelerated at a strong pace, driven by uplifts in hiring in business services and financial services, in particular.
Job creation also reflected greater optimism among firms, as sentiment rose to its strongest level since April, linked to expectations of an economic rebound. Higher staffing levels also helped to ease pressure on capacity, although outstanding business continues to increase.
Cost pressures remain elevated, and companies passed on higher energy, fuel, wage, and material costs and unfavourable exchange rates onto consumers, although the pace of increase softened to a five-month low.
The combined manufacturing and services PMI shows a sustained upturn in output, with a reading of 52.9 indicating a modest rate of expansion. AIB reported on Tuesday that output growth in the manufacturing sector had slowed for the second consecutive month in July.
