New figures show that growth in the services sector of the economy picked up in July, despite continuing inflationary pressures.

The AIB Ireland Services PMI, compiled by research group S&P Global, recorded 56.3 – up from 55.6 in June. Any figure above 50 means that activity rose. The PMI had hit 60 in May.

A similar survey earlier this week had shown that growth in the manufacturing sector weakened in July.

Financial services lead

The services survey found that growth in new business remained strong, with new export business hitting a four-month high due to increased demand from customers.

“As a result, July registered another significant increase in backlogs of outstanding business, as pressure on capacity rose further,” commented AIB chief economist Oliver Mangan.

Financial services recorded the fastest rate of expansion in July (61.9), but growth was weakest in the category covering technology, media and telecoms (51.4).

Firms also added more jobs during the month, amid greater optimism about the year ahead. The survey’s measure of optimism among firms recorded the highest figure since April, due to expectations of an economic rebound.

Price hikes

Although costs continued to rise, the rate of increase was the slowest in five months. Firms attributed the latest jump in prices to energy, fuel, wages, materials, and unfavourable exchange rates.

Services businesses also continued to increase their prices in response to higher costs – the rate of increase was the highest since April. According to the survey, the biggest price hikes came in the sector that included transport, tourism and leisure.

Mangan said that the survey pointed to continuing strong growth in services activity.

“By comparison, the flash July Services PMIs fell in the euro zone, UK and US to 50.6, 53.3 and 47, respectively, which are well below the Irish reading,” he pointed out.