Ireland's Service Sector Growth Slows Down With Near Stagnant Job Growth

What's going on here?

Growth in Ireland's service sector moderated in June, with job growth nearly halting, according to a survey released on July 3, 2024.

What does this mean?

The AIB Global S&P Purchasing Managers' Index (PMI) for Ireland slipped to 54.2 in June from 55.0 in May. While the index remained above 50, indicating growth since March 2021, the slowdown signals caution. Ireland's service sector still outpaced the eurozone (52.6) and the UK (51.2) PMIs. However, the most significant drop in activity was seen in the transport, tourism, and leisure sectors, which experienced the steepest decline since October 2023 and contributed to the slowest employment growth in 40 months.

Why should I care?

For markets: Holding steady amid the slowdown.

Despite the slowdown, service sector businesses have managed to keep Ireland's job market robust, with unemployment near a record low of 4%. However, continued pressure in transport, tourism, and leisure sectors could pose risks. Input price inflation slowed considerably, with the weakest input cost levels since February 2021, signaling potential easing in cost pressures for businesses. Investors should keep an eye on sector-specific impacts and broader economic indicators to gauge long-term trends.

The bigger picture: Ireland's resilience in context.

Ireland's service sector growth still outpaces both the eurozone and the UK, highlighting the country's relative economic resilience. The easing of input prices and employment growth stagnation are key focus areas, as the Central Bank of Ireland aims to maintain inflation around the ECB's 2% target. That said, policymakers remain wary of persistent services inflation, which could impact future monetary policy and economic stability across the region.