New business and hiring upturn see Ireland's services sector return to growth
Ireland’s services sector returned to modest growth in May, according to the latest AIB Ireland Services PMI survey, as both activity and new business volumes increased following a dip in April.
The seasonally adjusted AIB Ireland Services Business Activity Index rose to 50.8 in May, up from 49.7 in April, moving back above the 50 threshold that indicates expansion. However, growth remained marginal and below the long-run average of 55.0.
The rebound was driven by stronger demand conditions across several sectors, although performance remained uneven.
Technology, Media & Telecoms led growth with an index reading of 54.1, followed by Business Services at 53.8, which recorded its strongest expansion in four months. Financial Services (52.2) also returned to growth after a contraction in April.
By contrast, Transport, Tourism & Leisure continued to underperform, posting a sharp decline at 40.1, although the pace of contraction eased slightly compared to the previous month.
New business volumes also increased in May after flattening in April, with growth reaching a three-month high, albeit remaining modest by historical standards. Export demand also returned to growth after falling for the first time in ten months in April.
AIB Chief Economist David McNamara said the sector had stabilised after April’s contraction.
“The AIB Irish Services PMI for May shows modest growth, following a first decline in activity since early 2021 in April,” he said. “Overall, the PMI rose to 50.8 from 49.7 in April. Activity levels remained muted amid a contraction in outstanding business and continued rising costs linked to current geopolitical tensions.”
He added that Ireland continued to outperform some international peers despite subdued conditions. “The rate of growth in the Irish services sector was ahead of the flash Eurozone and UK PMIs at 46.4 and 47.9, respectively; but behind the US PMI, at 50.9.”
Employment across the services sector rose at a faster pace in May, marking the strongest job creation in four months. Hiring increased in Technology, Media & Telecoms, Financial Services and Business Services, although Transport, Tourism & Leisure continued to see job losses.
McNamara noted that labour market resilience remained a key feature of the data.
“There was broad-based resilience in hiring activity in the services sectors overall, with a rise in employment growth to the fastest pace since January,” he said.
Inflationary pressures remained a central theme in the survey. Input prices were broadly unchanged from April’s 40-month high, driven by fuel costs, wage pressures, supplier increases and geopolitical factors.
While charge inflation eased slightly from April’s two-year high, firms continued to pass on higher costs to customers.
Overall private sector activity, captured by the AIB Composite PMI, also strengthened in May, rising to 52.5 from 51.4 in April.
This signalled the fastest expansion in three months, supported by stronger manufacturing output and a renewed rise in services activity.
David McNamara, AIB chief economist.
McNamara said sentiment had improved but remained cautious. “Business sentiment remained in positive territory, improving compared to April,” he said.
“However, confidence was still subdued, particularly in Transport, Tourism & Leisure, which recorded the weakest outlook for five-and-a-half years.”
Despite ongoing cost pressures and uneven sector performance, the latest data points to a cautiously improving outlook for Ireland’s services economy heading into the summer months.
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