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Broad rise in business activity seen in May, but inflation is still snapping at our heels

The Irish services sector recorded a rise in activity last month, while numbers employed in the industry also increased, according to AIB’s monthly survey of purchasing managers.

The index stood at 55.0 in May, up from 53.3 a month earlier. Any reading over 50 indicates an increase in activity.

“The growth in activity was broad-based once again across all sub-sectors,” AIB chief economist David McNamara said.

The rate of growth here was ahead of UK, EU and US indexes.

‘Growth in activity was broad-based once again across all sub-sectors’

The strongest growth in May was recorded in the Irish tech, media and telecoms subsector This growth followed two months of sluggish expansion in March and April.

Financial services ranked second, followed by business services and transport and tourism.

AIB attributed May’s activity growth to the ongoing trend of new work, which was first recorded in March 2021.

In May, companies noted a rise in new work from existing customers, a well as projects involving new clients following marketing initiatives.

New export business was down to a three-month low despite activity in the transport, tourism and leisure sectors.

‘Input cost inflation remained at a high rate in May’

“Overall, Irish firms continued to report rising levels of new business, and this was linked to solid domestic and international demand, particularly from Europe and the UK.

"The volume of outstanding work also rose again, but performance varied across sectors,” Mr McNamara said.

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The rate of job creation hit a three-month high as companies looked to meet ongoing demand. Hiring was recorded in all sub-sectors, apart from transport, tourism and leisure, which recorded a slight decline in staff numbers.

Cost pressures increased for businesses last month, with employers highlighting the impact of fuel and wage costs.

As a result, there were further consumer price increases, though the output price index dropped to a five-month low.

“Input cost inflation remained at a high rate in May, with the pace of increase accelerating compared to April,” Mr McNamara said.

Business confidence reached a three-month high, the report found. This optimism was connected to improving demand from consumers, as well as tourism, falling inflation, new services and hopes for interest rate hikes.

​The rate of inflation in Ireland in May was 1.9pc, according to the EU Harmonised Index of Consumer Prices (HICP) for Ireland.

This was up from the 1.6pc recorded in April, as transport costs rose across the month.

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