Service providers hiked charges at record rate in April

Surging costs drove a record increase in the prices charged by service providers in April, the latest AIB Purchasing Managers’ Index for the sector showed.

Around one in three firms raised their prices, the monthly survey of activity found.

The services sector accounts for over half of activity in the economy here and covers areas as diverse as tourism and travel, financial and business services, and media and telecommunications.

The pressure on input costs in services was described as remaining ‘severe’ in April and was linked to wages, energy, fuel, insurance, shipping, food and oil.

The war in Ukraine and Brexit were identified as drivers of inflation, as well as the supply chain difficulties arising from the pandemic.

The rate of input price inflation eased from March’s peak but it was still the second-highest on record, the PMI report concluded.

Concerns over inflation and the ongoing war in Ukraine continued to dampen confidence with the 12-month outlook picking up only slightly since plunging in March.

That was in the immediate aftermath of Russia’s invasion of its neighbour.

More positively, the overall Services Business Activity Index signalled a continued increase in output in the sector.

Growth has been maintained every month since March 2021, the report noted, and has registered above the long-run survey trend level since April of that year.

However, a slight easing in the month-on-month pace of growth last month was the first registered in 2022 so far.

Service providers continued to increase staffing levels in April, which was linked to rising workloads and efforts to replace departing staff.

The rate of job creation eased for the first time in four months, but was nonetheless among the fastest seen over the past three years.

“There was another sharp rise in new business, including exports, as demand continued to strengthen, with employment growth remaining firm,” AIB Chief Economist, Oliver Mangan noted.

“The rebound in demand is putting growing pressure on operating capacity, with another significant rise in outstanding business in the month,” he added.

Mr Mangan pointed to the Future Activity Index which remained below its long-run average as ongoing concerns around the war in Ukraine and high inflation dampened confidence about the outlook.

“The rate of input price inflation was the second fastest in the 21-year history of the survey,” he noted.