Ireland: Services PMI increases sharply in February
The IHS Markit Services Purchasing Managers’ Index (PMI) rose to 61.8 in February from January’s 56.2. As a result, the index moved further above the 50 no-change threshold, signaling a faster improvement in business conditions compared to the previous month.
The month-on-month increase in the index was the sharpest on record, with new business growing at the fastest pace in over six years as firms benefitted from the easing of Covid-19 restrictions. Indeed, the transport, tourism and leisure sector—which has been particularly hard-hit by pandemic-related restrictions—saw a particularly marked improvement in demand. That said, despite a pick-up in employment growth, business activity was held back by supply bottlenecks and ongoing Covid-19-related labor shortages, with backlogs and input inflation rising at the fastest rate in over 21 years.
AIB’s chief economist Oliver Mangan highlighted the variety of factors driving the rise in price pressures:
“Businesses continued to experience marked upward pressure on input prices, especially from higher labor and energy costs, but also fuel, insurance, shipping and UK customs.”
That said, he noted firms’ very favorable business outlook:
“Firms in all sectors remained very optimistic on the 12-month outlook for business, with activity expected to gain further momentum as the pandemic recedes, in particular tourism.”