Growth in the service sector of the economy slowed in January, hitting its weakest level in almost three years, according to a new survey.

The AIB Ireland Services PMI (purchasing managers’ index) recorded 50.5 – down from 53.2 in December. The index has been above the 50 mark that signals growth since March 2021.

"Irish firms continued to report rising levels of new business, but the pace of growth eased in January to the second-weakest in 13 months,” said David McNamara (chief economist, AIB).

He added, however, that growth in new export orders accelerated at the fastest pace in five months.

Business mood still bright

There was strong growth in financial services, while activity in the media-and-telecoms sector also rose. Activity in two sectors – business services and the category covering transport, tourism and leisure – declined.

Employment also continued to rise, however, and business sentiment about the prospects for the coming year remained optimistic, helped by increasing expectations of a recovery in the wider economy in 2024.

"Inflationary pressures, though, strengthened in January. The rate of input-price inflation picked up for a second consecutive month, with firms reporting higher labour costs as the main source of inflation,” said McNamara.

“These higher operating costs were passed on to customers, with prices charged for services rising at their quickest pace in seven months," he added.