Steady Irish service sector growth reignites inflationary pressures

DUBLIN (Reuters) – Ireland’s services sector grew at a strong rate again last month, reigniting inflationary pressures as both input costs and prices charged accelerated primarily on the back of higher wage demands, a survey showed on Wednesday.

The AIB S&P Global Purchasing Managers’ Index (PMI) for services fell a touch to 56.8 from 57.0. The index has stayed above the 50 mark separating growth from contraction for over two years and comfortably so throughout this year.

While the survey had shown an easing of cost pressures in the last three or four months, the sub-index measuring input prices rose to 64.7 in June from 63.9 in May and the prices charged accelerated at an even faster rate to a four-month high of 59.0 from 56.7.

Increasing business expenses were largely a result of persistent wage pressures across the sector, the survey’s authors quoted respondents as saying.

While Irish inflation fell to a near two-year low of 4.8% last month, core inflation remained at 5.7% and the central bank only expects the closely watched underlying measure to peak later this year.

Like in other euro zone countries, Ireland’s services sector has continued to grow while manufacturing activity has declined. Ireland’s economy as a whole though is outperforming the bloc and is expected to expand again this year after being the fastest growing across the bloc last year.

A separate survey on Monday for Ireland’s manufacturing sector showed a slump in activity deepened last month, with input costs and prices falling rather than rising.

(Reporting by Padraic Halpin; Editing by Susan Fenton)