Ireland's service sector growth slows down as Middle East conflict impacts become evident

LootboxPhobia · 2026-04-07T05:59:00+00:00

Ireland's March Services PMI drops to 50.7, the lowest expansion rate in five years, affected by rising costs due to the Middle East conflict and weakened business confidence. New business growth slows, sectors such as transportation and tourism contract, employment decreases, and overall private sector expansion also slows down.

LootboxPhobia

2026-04-07 05:59:00

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Investing.com – Based on the AIB Ireland Services PMI survey released on Tuesday, Ireland’s services sector saw one of the weakest expansion rates in five years in March, as the outbreak of the Middle East war drove up costs and weakened business confidence.

The AIB Ireland Services Business Activity Index fell from 51.8 in February to 50.7 in March, marking the fourth consecutive month of decline and the slowest growth rate in seven months. The reading indicates only a slight expansion, well below the long-run average of 55.0.

Of the four sub-sectors, three recorded modest growth. Business services came in at 51.5, financial services at 51.0, and technology, media and telecoms at 51.4. The transport, tourism and leisure sector contracted to 47.6, marking the ninth decline in 12 months.

Growth in new business slowed for the fourth consecutive month, reaching the weakest pace since August, while new export business was broadly flat.

Input costs surged at the fastest rate in three years. Respondents attributed higher spending to fuel, energy, wages, pension contributions, raw materials, and professional services; the Middle East war and supply chain disruptions were seen as contributing factors. The transport, tourism and leisure sector recorded the fastest increase in costs among all sub-sectors.

Service providers cut headcount in March, the only third employment decline in five years. Employment in all three sub-sectors fell slightly, while the financial services sector saw a slight increase.

Business confidence fell to the lowest level since October 2020. Companies said uncertainty about how the war will affect the global economy and domestic consumer confidence has weighed on their outlooks.

The AIB Ireland Composite PMI Output Index, which combines manufacturing and services data, fell from 52.5 in February to 52.1 in March, indicating the private sector’s pace of expansion was the slowest in six months.

David McNamara, chief economist at AIB, said the services PMI at 50.7 points to very modest growth, and that activity levels are weakening amid slower growth in new business and rising costs related to the Middle East war.

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