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Cost pressures intensify but remain below earlier peak, says AIB
Ireland’s services sector expanded in August at its fastest pace since late 2025, despite a notable slowdown in hiring and an increase in inflationary pressures, The bank’s latest services purchasing managers’ index indicates that there was little change in employment levels across the wide-ranging sector last month after a flurry of hiring in July.
It meant that August was only the fourth month since March 2021 in which the sector did not add jobs, AIB said in the PMI report, which is based on a survey of around 400 services firms. At 55.4, the headline index was up by 0.2 points from July, which the report authors said was the fastest rate of growth since November 2025. Any figure above 50 signals growth, while a number below that points to contraction.
Aoife Matthews, Jennifer O’Connell and Louise O’Riordan: ‘This is for our mothers, sisters, friends, and ourselves – so only the best will do’Of the four main subsectors, financial services reported the fastest rate of headline growth, followed by technology, media and telecommunications. After a slow first half of the year, transport, tourism and leisure services activity levels expanded for the first time in six months.
AIB chief economist David McNamara said the headline results were underpinned by growth in new business and improved sentiment among services firms about their prospects.
“New business continued to grow strongly following a dip in activity earlier in the year, while new export business also expanded on the month, albeit at a more modest pace than in July,” he said. “Higher activity was driven by increased demand and new business wins. In that context, the volume of outstanding work rose steadily in August once again.
However, despite a solid demand backdrop, employment fell marginally for the first time since March, following several months of rapid gains. ” Meanwhile, services businesses reported an increase in input costs in August for the first time in four months.
However, while the rate of inflation “moved further above the long-run survey trend”, AIB said, it was still the second-weakest reading in six months.
“On the inflation front, input cost inflation ticked up in August, but remains well below the 40-month peak reached in April and May, and broadly in line with the long-run survey average,” McNamara said. “However, cost pressures were driven by rising wages, fuel and transportation. The rate of increase in prices charged also picked up, and it remains elevated in a historical context.
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