Activity in the Irish services sector rose last month, with improved employment prospects and higher overseas demand driving the strongest rate of business activity this year.
However, transport, tourism and leisure continue to lag the sector, clocking up its fifth successive decline in activity in July.
Overall, the AIB services purchasing managers’ index came in at 55.2, up one point on June and its highest reading since November last year. Any reading above 50 signifies growth in the sector with a reading under that level pointing to contraction.
The July reading brought the index average since 2000 to 55.0.
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The report positions the State’s services industry “well ahead” of its euro-zone, British and US counterparts. While all three also recorded expanded activity, their readings were noticeably lower at 51.6, 51.8 and 53.6 respectively.
“New business continued to grow strongly following a dip in activity earlier in the year, while new export business also expanded sharply on the month, at the fastest pace since end-2024,” said AIB chief economist David McNamara.
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“Higher activity was driven by increased demand, new sales and investment in business capacity,” he said. “In that context, the volume of outstanding work rose steadily again in July following two months of contradiction.”
Among the four sectors monitored by the index, only transport, tourism and leisure registered a reading below 50 – at 49.4 – its fifth successive monthly decline in activity.
This sector did see its first increase in new work for six months, “albeit only marginally”, the report noted. It also saw job creation for the first time since January.
Technology, media and telecoms remained the fastest-growing sector in Ireland last month, recording a reading of 61.4, with business services coming next with 55.4 and then financial services following at 52.6.
“Irish service providers raised their expectations for growth over the next 12 months to July 2027,” the report said, “with overall sentiment the strongest of the year so far.” Companies surveyed were optimistic on broader economic growth, investment and recruitment of staff.
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However, within that, the outlook among financial services firms was the softest in nearly six years, despite input cost inflation easing to its weakest since March 2021.
Employment across the sector increased at the quickest rate since April 2023, the report added, while new business growth “eased slightly”, although it was “still among the strongest over the past four years”.
McNamara said “input cost inflation eased further from the 40-month peak reached in April and May to a level broadly in line with the long-run survey average.
However, there were cost pressures driven by rising wages, supplier and freight costs, energy and fuel. “The rate of increase in prices charged also decelerated to a five-month low, but it remained elevated in a historical context,” he said.
