The AIB Purchasing Managers' Index (PMI) for July shows that Irish service sector companies experienced the strongest growth in business activity in over 20 years.

The latest survey data also signalled rising inflationary pressures, with input cost inflation the highest in 13 years. As a result, prices charged by service providers rose the most in over five-and-a-half years.

Firms linked higher costs to wages, fuel, shipping/freight charges, insurance and Brexit.

The headline figure, the Services Business Activity Index, is an index calculated from a question that asks for changes in the volume of business activity compared with one month previously. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses.

The index varies between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease.

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The Services Business Activity Index remained above the no change mark of 50.0 for the fifth successive month in July, rising to 66.6 from 63.1 in June.

Companies linked higher activity to the continued lifting of restrictions and greater confidence among consumers.

The strongest rate of growth was recorded in transport, tourism & leisure (70.2), which registered another near-record pace of growth as consumer demand rebounded.

Growth accelerated in the three other sectors, led by Technology, Media & Telecoms (68.2), Business Services (65.0) and Financial Services (64.2) respectively.

Growth was driven by robust demand both domestically and in export markets, according to the survey.

Service sector employment rose for the fifth month running, and at the fastest pace since February 2017.

The survey also revealed that companies were reporting rising backlogs linked to stronger demand, staff shortages (partly as a result of enforced Covid-19 testing and isolation) and delays from suppliers.

Sentiment across the service sector strengthened for the fifth time in six months and was the third-highest in over four years as restrictions continued to ease, the vaccine rollout continued apace and Brexit arrangements were normalised.

AIB chief economist Oliver Mangan (pictured) noted that the Irish reading is above the Services PMIs for July in the UK and eurozone, which came in at 57.8 and 60.4, respectively.