The service sector remained severely restricted by the lockdown measures to contain the Covid-19 pandemic, according to AIB’s May PMI data. 

Total business activity fell at the second-fastest rate since the survey began in May 2000, although it eased notably compared with April’s collapse. Employment also continued to shrink rapidly. The 12-month outlook for activity remained negative, but less so than in March and April. 

The Business Activity Index rose to 23.4 in May, from April’s record low of 13.9. This figure was still the second-lowest ever recorded, and signalled a further severe drop in service sector activity midway through the second quarter. 

About 61% of respondents reported lower activity during the month, compared with 78% in April. The index remained some 36.5 points below February’s pre-crisis figure of 59.9. 

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All four sub-sectors continued to record severe contractions in business activity in May. Transport, tourism & leisure again registered the fastest decline, and technology, media & telecoms the slowest. All four sectors registered weaker falls than in April, however. Business services and transport, tourism & leisure posted the biggest one-month gains, but still recorded stronger overall rates of decline than the other two sub-sectors. 

The volume of new business fell at a slower rate in May, but still the second-fastest on record. Almost two- thirds (65%) of firms reported weaker demand, down from 79% in April. Companies reported a lack of new work from hesitant clients, as demand continued to dry up due to the pandemic. 

Employment fell markedly for the third consecutive month due to temporary shutdowns and very little new business. The rate of job shedding eased only slightly from April’s record and was the fourth-fastest in the 20-year survey history. Transport, tourism & leisure again experienced a marked decline in workforce. 

AIB chief economist Oliver Mangan (pictured) commented: "The May reading for Ireland is below the flash services PMIs for the same month in the Eurozone and UK of 28.7 and 27.8, respectively. This is consistent with containment measures being unwound at a slower pace in Ireland than elsewhere. All four sectors covered in the Irish survey registered very low readings for business activity of below 25.0.

"The key components of the survey were very weak, with new business and export orders still at depressed levels. Incomplete contracts, or backlogs, continued to fall markedly. Jobs are still being shed at a marked pace. Meantime, the recessionary conditions saw both input and output prices fall further in all four service sectors. The 12-month outlook did improve somewhat from March and April and  we expect a rebound in activity from the current depressed levels will be seen over the summer months as lockdown restrictions are eased and the economy starts to open up again."