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Services sector expands once more in July

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AIB's Oliver Mangan

AIB's Oliver Mangan

AIB's Oliver Mangan

Activity accelerated once again in the Irish services sector in July with a sharp jump in new business, according to the latest AIB Purchasing Managers’ Index.

It was the 17th consecutive monthly rise in the index, signalling a strong recovery in the sector from the hardest months of the Covid-19 pandemic.

Business confidence among services firms also improved to a three-month high amid optimism about a sustained economic upturn.

Growth was broad-based across the various subsectors, with financial services showing the most rapid expansion.

The survey results contrasted with Tuesday’s manufacturing index, which showed a decline in activity, prompting fears that the Irish economy could be showing signs of weakness.

"The AIB Irish Services PMI for July showed a reacceleration in the pace of growth in the sector, in marked contrast to most other countries,” said AIB chief economist Oliver Mangan.

“Growth in new business remained strong, with the rate of increase in new export business picking up to a four-month high amid stronger client demand. As a result, July registered another significant increase in backlogs of outstanding business as pressure on capacity rose further.”

He added that there was another marked rise in employment, continuing a trend evident in the first half of the year. The job creation partially reflected greater optimism amongst firms about increased activity in the year ahead.

Sentiment was at its strongest level since April, as businesses looked forward to a sustained period of economic rebound. Inflation is still a severe problem for services firms, but the rate of cost inflation slowed to a five-month low. However, companies were able to increase prices at a faster pace than input costs went up, helping to offset the impact of inflation.

Energy, materials costs and exchange rates continued to be a drag, but overall inflation grew at its slowest pace since December.

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