Service sector expansion sustained in December

January 5, 2024

Irish firms continued to report rising levels of new business, but the pace of growth slowed in December to the second weakest in 2023.

The AIB Irish Services PMI for December showed a continued expansion in business activity in the sector, but as has been the case for most of the year, the pace of growth eased.

The index came in at 53.2 in December, down from 54.2 in November. This was the second lowest reading in 2023.

However, the Irish index remains above elsewhere, with the flash services PMIs coming in at 52.7, 48.1 and 51.3 for the UK, Eurozone and US, respectively, in December.

The December AIB PMI survey data signalled a further rise in service sector activity, extending the current growth sequence that began March 2021. Rates of expansion in total activity and new business both slowed on the month, resuming an easing trend evident across much of 2023.

One bright spot was new exports orders which hit their highest level since August, with the UK mentioned as a source of growth.

“Encouragingly also, for the second month in a row, all four service sub-sectors covered in the survey registered growth,” said Oliver Mangan, AIB Chief Economist.

“Financial Services and Technology, Media & Telecoms posted the fastest rates of expansion. Employment also continued to rise, though the pace of job creation hit a 34-month low. Business sentiment about the prospects for activity over the coming 12 months hit its highest level since May, helped by growing expectations of rate cuts in 2024,” he added.

Looking ahead to 2024, confidence improved as firms expect interest rates to fall and geopolitical tensions to ease.

Employment rose at the slowest rate in the near three-year period of job creation, while wages continued to underpin cost pressures which reached the highest in four months.

All four sub-sectors registered higher activity in December, as had been the case during November.

For the first time since July, Financial Services (54.7) posted the fastest growth, just ahead of Technology, Media & Telecoms (54.2) which had been the top-ranked sector for the previous four months.

Modest expansions were registered in Business Services (52.2) and Transport, Tourism & Leisure (51.5).

Irish service providers continued to report rising levels of new business in December, extending the current growth sequence that began in March 2021.

The rate of expansion resumed an easing trend, however, and was the second weakest in 2023.

The only sector that did not report slower demand growth in the latest period was Financial Services, with Business Services seeing almost no increase in new work.

Article Source – Service sector expansion sustained in December – RTE

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