Services sector sees growth slowdown as inflation falls

The index was 54.2 in June, down from 55.0 in May. Any reading above 50 indicates increasing activity.

According to AIB, three of the four sub-sectors saw higher activity last month.

Financial services recorded the highest level of demand last month and was the fastest growing subsector in six of the last seven months.

The technology, media and telecommunications, and business services sectors also saw growth in June.

However, in the transport, tourism and leisure subsector, demand fell last month, the first decline in activity in five months.

Companies in the sector said that last month, activity in the Irish services sector was driven primarily by new customers, increased competitiveness and long-term investment.

The pace of growth was the lowest since January.

In June, the level of unfinished work in companies in this sector increased again.

AIB believes the reason was a reluctance to increase staff numbers.

Employment in the service sector rose in June, but it was the weakest pace in 40 months of job growth in the industry.

The transport, tourism and leisure sector saw a slight decline in the number of workers during the month.

Businesses also reported an improvement in pricing pressures last month, with the input price inflation rate now at its lowest level since February 2021.

“Respondents cited wages, utilities and insurance as the main sources of higher costs,” said David McNamara, AIB’s chief economist.

“Firms continued to raise prices for customers, but the output price index fell to a seven-month low in June,” he added.

According to the EU’s Harmonised Index of Consumer Prices (HICP), Ireland’s inflation rate was 1.5% in June.

This represents an increase of 0.3% compared to May.

Companies were generally positive as they looked to activity levels next year.

Companies cited economic recovery, lower interest rates, new products, a larger sales team, tourism and overseas demand as key factors influencing potential future sales.

“Business sentiment about the prospects for business over the next 12 months was positive, but the index fell to a 14-month low,” Mr McNamara said.