Ireland’s service sector growth slows as employment remains near stagnation

What is going on here?

Growth in the Irish services sector slowed in June and employment growth almost came to a halt, according to a study published on 3 July 2024.

What does it mean?

The AIB Global S&P Purchasing Managers’ Index (PMI) for Ireland fell to 54.2 in June from 55.0 in May. While the index remained above 50, indicating growth since March 2021, the slowdown signals caution. Ireland’s services sector continued to outpace the eurozone (52.6) and UK (51.2) PMIs. However, the most significant decline in activity was seen in the transport, tourism and leisure sectors, which recorded the sharpest decline since October 2023 and contributed to the slowest employment growth in 40 months.

Why should I care?

For markets: We maintain stability despite the slowdown.

Despite the slowdown, service sector businesses have managed to maintain a strong labour market in Ireland, with unemployment close to a record low of 4%. However, continued pressure in the transport, tourism and leisure sectors could pose risks. Entry price inflation slowed significantly, with input costs at their lowest levels since February 2021, signaling a potential easing of cost pressures for businesses. Investors should pay attention to sector-specific effects and broader economic indicators to assess longer-term trends.

Bigger picture: Ireland’s resilience in context.

Growth in Ireland’s services sector continues to outpace both the eurozone and the UK, underlining the country’s relative economic resilience. Softening input prices and stagnant employment growth are key areas of concern as the Central Bank of Ireland seeks to keep inflation around the ECB’s 2% target. However, policymakers remain concerned about persistent services inflation, which could have implications for future monetary policy and economic stability across the region.