Ireland’s services sector activity expanded in September despite rising inflation, with the AIB Services PMI falling to 54.1 from 55.4 in August, according to multiple reports.
The Irish services sector saw slower growth in September, with the AIB Ireland Services PMI dropping to 54.1 from 55.4 in August, marking the first decline in the current growth sequence. However, activity levels remained above the 50-point threshold indicating expansion, driven by new business growth and increased employment, according to David McNamara, AIB’s chief economist. New business continued to grow strongly following a dip in activity earlier in the year, although new export business growth eased on the month,
McNamara said, citing strong demand from new clients and marketing efforts.
Services Sector Growth Slows but Remains Resilient
The services PMI, which measures activity across sectors like technology, media, and tourism, fell to 54.1 in September, below the 55.4 reading in August. Despite the slowdown, the sector maintained growth, with technology, media, and telecommunications seeing the fastest expansion at 58.3. Input price inflation accelerated to its highest level since May, driven by higher fuel and energy costs, while output prices rose at the fastest pace in five months.
Employment in the services sector rebounded after a pause in August, though hiring remained modest. The volume of outstanding work rose at the fastest pace in over two years, indicating capacity pressures. Business confidence improved to its highest level since February 2025, linked to planned investments and new contracts, as reported by AIB. Overall confidence improved for the sixth month running to the highest since February 2025, linked to planned business investments, new contracts and marketing efforts,
the report stated.
Manufacturing Shows Robust Expansion Amid Inflation
Ireland’s manufacturing sector saw a robust improvement
in September, with the AIB Manufacturing PMI rising to 55.5 from 55.4 in August. Output, new orders, and employment all expanded, supported by increased demand from domestic and overseas markets. However, inflationary pressures persisted, with input costs rising sharply due to higher energy and fuel bills. McNamara noted the role of higher energy and fuel bills in contributing to the steepest increase in average cost burdens across the manufacturing sector since June.
Export sales gained momentum, though business activity expectations fell to a five-month low amid geopolitical uncertainty. Manufacturers cited global economic concerns as a key factor in dampening confidence, with 38% predicting output increases over the next year, down from 49% in August. Despite these challenges, firms managed to protect margins by raising selling prices, with output price inflation picking up in September.
Inflation Pressures and Future Outlook
Inflationary pressures remained a concern, with input price inflation reaching a five-month high. Higher wages and energy costs were cited as primary drivers, though firms reported strong demand that allowed them to pass on costs to consumers. McNamara noted that higher input prices reflected elevated wage pressures, alongside higher fuel and energy costs, while the survey pointed to prices charged rising at the sharpest rate in five months.
Looking ahead, business sentiment remains cautiously optimistic. The AIB composite PMI, which combines services and manufacturing data, stood at 55.6 in September, above the long-run average of 53.8. However, the services sector’s slowdown and manufacturing’s reliance on global demand highlight ongoing risks. The Irish manufacturing PMI remains above the flash readings for the Eurozone and UK at 52.7 and 52.0, respectively; but below the US at 57.0,
McNamara noted, emphasizing Ireland’s uneven performance compared to international peers.
As firms face rising costs and global uncertainties, the focus will remain on sustaining growth while managing inflation. The services sector’s resilience, coupled with manufacturing’s strong performance, suggests Ireland’s private sector remains a key engine of economic activity, albeit with challenges ahead.