AIB services PMI rises to 54.3 despite inflation warning

New business grew for a sixth straight month

However, since 2022, rising fuel and wage costs pushed the outlook for Irish services firms to its sharpest monthly fall.

For a sixth straight month, new business grew, even if at a slower pace than September.

As gains from technology, media, telecoms and tourism clients were offset by declines elsewhere, export demand stalled.

Why Irish services firms are turning more cautious

The shift in mood is being driven by cost pressures.

In October, input price inflation jumped to a five-month high, which is its third-sharpest rise since February 2023.

In the meantime, wages, fuel, energy and supply shortages all pushed costs up.

As they lifted the prices they charge at the fastest rate in almost four years, firms passed much of that on.

David McNamara, AIB's chief economist, pointed to that pressure as the reason which caused the weaker mood.

"A number of survey respondents mentioned that high inflation and macroeconomic uncertainty were undermining the outlook," he said.

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What does a PMI reading of 54.3 mean?

While a PMI reading above 50 signals growth, one below 50 signals contraction.

What October's 54.3 means is that Ireland's services sector is expanding solidly.

This way, it's continuing a growth run broken only once, in April, in more than five years.

Why did the outlook for Irish services firms weaken?

Survey respondents pointed to high inflation and economic uncertainty.

The future activity index, which tracks firms' 12-month outlook, fell to a six-month low, its steepest monthly drop since March 2022, as rising wages, fuel and energy costs pushed prices higher.