Services sector growing at high rate as business conditions improve

Finance, tourism and tech all see activity rise across the month

The Irish services sector recorded a rise in activity and new work last month, growing at the fastest rates since last July.

The services business activity index rose again in March, according to AIB’s monthly survey of purchasing managers.

The index stood at 56.6, up from 54.0 reported a month earlier. Any reading over 50 indicates an increase in activity.

“The acceleration in activity was broad-based and points to improving business conditions throughout the first quarter of 2024,” AIB chief economist David McNamara said.

All four subsectors recorded a rise in activity across the month, with financial services seeing the fastest growth for the fourth month in a row. This was followed by business services and transport and tourism, as well as the technology, media and telecoms industry.

AIB attributed the growth in March to a boost in new work as demand from overseas markets grew. New export business increased by the most in 10 months, with anecdotal reports suggesting strong demand from the UK and Germany.

“The volume of outstanding work also increased on the month, as earlier new orders growth now translates into activity,” Mr McNamara added.

Outstanding business grew at a modest pace, while the business services sector recorded a decline for the third month in a row.

As demand continued to rise, new jobs were added across the sector, although the rate of job creation slowed from the eight-month high in February. Financial services reported the sharpest increase in staffing in the first three months of the year, the report found.

Inflationary pressures remained a factor for companies in the sector last month despite easing for first time in four months. Businesses attributed rising prices to the cost of labour, utilities and fuel.

The technology, media and telecoms industries experienced the fastest increases in both input costs and charges across the month.

“Firms continued to raise prices for customers, but output inflation also slowed on the month,” Mr McNamara said.

“Business sentiment about the prospects for activity over the coming 12 months also moderated.”

Business confidence eased to a six-month low but service providers remained optimistic for the year ahead.

Businesses pointed to new products and services, as well as hopes for interest rate cuts from central banks.

The rate of inflation in Ireland fell below 2pc for the first time in three years in March, according to the EU Harmonised Index of Consumer Prices (HICP) for Ireland.

Prices rose by 1.7pc in the year to last month, down from an annualised rate of 2.3pc in Ireland in the year to February.

Other companies in the services sector highlighted plans for acquisitions in the year ahead, with some indicating demand for renewable energy.

In the United States, softer-than-expected services sector data published yesterday offered relief to investors worried about fewer-than-expected interest rate cuts from the Federal Reserve this year.

The Institute for Supply Management’s non-manufacturing PMI came in at 51.4 against expectations of 52.7 forecast by economists polled by Reuters.

Reporting On:independent.ie