Irish servicessector boost from tourism and increasein activity

AIB’s services purchasing managers index (PMI) dropped slightly last month to 57.

This was down from 58.4 in April, which was an 11-month high for the index. Any reading over 50 indicates an increase in activity.

Ireland’s activity levels remained ahead of other economies. The Eurozone services PMI stood at 55.9, while the UK and US figures were both 55.1, the index showed.

There was a sharp increase in activities for Irish service firms in May, particularly for businesses in the transport, tourism and leisure industries.

The index also recorded a surge in new business last month, the second-fastest increase in new work in a year.

"May was notable for a sharp increase in activity and strong growth in new business, including from abroad, in all of the four sub-sectors covered in the survey,” AIB’s chief economist Oliver Mangan said.

"In particular, there was a very marked pick-up in the transport, tourism and leisure sector, helped by a surge in visitor numbers from overseas.”

New export orders rose at the quickest rate since last July.

This demand was attributed to greater overseas investment and a rise in the number of visitors to Ireland.

As the level of activity rose, so too did the number of people employed in the services sector here.

"Employment posted a further solid rise, though firms reported difficulties in sourcing staff,” Mr Mangan said.

The increase in employment was below the six month high recorded the month prior.

Irish companies also reported difficulties in sourcing candidates, with respondents stating that current levels of staff were no longer able to cope with the increase in new business.

This contributed to the 27th consecutive month of rising work backlogs.

This was reflected in the latest Fáilte Ireland tourism barometer, which showed that worker shortages are among the top five concerns ahead of the summer.

Almost three-quarters of Irish restaurateurs surveyed said they can’t get the required numbers of staff at present.

This is the highest proportion of any sector to report this.

Companies in the Irish services sector also struggled to reduce costs last month as wages continued to rise, AIB reported.

However, freight and raw materials prices moderated in May.

The rate of increase in input costs eased for the sixth month in a row, leading to the softest rate of growth in over two years.

As a result, prices passed onto customers increased at the slowest pace since June 2021.

"With the continuing strong growth in activity, inflationary pressures remained elevated in May, but they are easing,” Mr Mangan said.

“Businesses again reported significant upward pressure on input costs, in particular wages. The rate of increase in cost inflation, though, did fall to its lowest level in over two years,” he added.

"Increases in costs continue to be passed on in higher prices to customers, but here again, selling price inflation dipped to a near two-year low.” he concluded.

Companies in the services industry also grew more optimistic in their output for the year ahead last month.

This was the second highest degree of confidence since February of last year.

Irish businesses pointed to successful product launches and a payoff from upcoming advertising campaigns and recent investments.