The December 2025 AIB Services PMI for Ireland registered a strong 58.50, well above the market estimate of 55.10 and the previous month’s 56.70. This figure signals a robust expansion in the Irish services sector, the highest since April 2025’s 55.30 and a notable acceleration from the mid-year lull around August and September when the PMI hovered near 50.60-50.90. The reading reflects resilience amid tightening monetary policy and ongoing geopolitical tensions affecting global trade and investment flows.

Drivers this month

• Increased new business inflows, particularly from technology and financial services.
• Improved employment levels supporting service delivery capacity.
• Price pressures easing slightly, allowing margin expansion.

Policy pulse

The PMI reading remains comfortably above the neutral 50 mark and well above the 12-month average of 53.90, suggesting that monetary tightening by the European Central Bank (ECB) has yet to significantly dampen service sector growth. This supports the ECB’s cautious approach to further rate hikes, balancing inflation control with growth preservation.

Market lens

Immediate reaction: EUR/USD strengthened by 0.15% within the first hour post-release, reflecting improved sentiment on Ireland’s economic resilience. The 2-year German bund yield edged up 3 basis points, signaling modest repricing of ECB policy expectations.

The AIB Services PMI is a critical barometer for Ireland’s dominant services sector, which accounts for over 70% of GDP. The December 58.50 reading contrasts with the subdued summer months when the index flirted with contraction territory (August: 50.90, September: 50.60). This rebound aligns with other macro indicators: Q3 GDP growth was revised upward to 4.10% YoY, and unemployment held steady at 4.30% in November.

Monetary Policy & Financial Conditions

ECB’s recent rate hikes have pushed the main refinancing rate to 3.75%, tightening financial conditions. However, the services PMI suggests that credit availability and corporate confidence remain sufficient to support expansion. The Irish government bond yield curve steepened slightly, reflecting market expectations of a gradual slowdown rather than a sharp contraction.

Fiscal Policy & Government Budget

Fiscal policy remains moderately expansionary with the 2025 budget targeting a 0.50% of GDP deficit reduction. Public investment in digital infrastructure and green services is supporting the sector’s growth. However, rising debt servicing costs could constrain future fiscal space, especially if ECB rates remain elevated.

External Shocks & Geopolitical Risks

Ongoing geopolitical tensions, including Brexit-related trade frictions and EU-US tech policy disputes, pose downside risks. Supply chain disruptions have eased but remain a concern for service providers reliant on international inputs. The PMI’s strength suggests firms are adapting well, but vigilance is warranted.

Figure 1: AIB Services PMI, Feb 2025 – Dec 2025

• Feb 2025: 53.40
• Jun 2025: 54.70
• Aug 2025: 50.90
• Nov 2025: 56.70
• Dec 2025: 58.50

Market lens

Immediate reaction: The EUR/GBP pair appreciated by 0.12% post-release, reflecting improved investor confidence in Ireland’s economic outlook. The Irish stock index ISEQ gained 0.80%, led by service-oriented sectors.

Looking ahead, the AIB Services PMI points to continued growth in Ireland’s services sector through early 2026. However, risks remain from tighter ECB monetary policy, potential fiscal consolidation, and external shocks. We outline three scenarios:

• Bullish (30% probability): PMI sustains above 57, driven by strong domestic demand and export growth, supporting GDP growth above 4.50% in 2026.
• Base (50% probability): PMI moderates to 54-56 as monetary tightening weighs on credit and investment, with GDP growth around 3.50%.
• Bearish (20% probability): External shocks and fiscal tightening push PMI below 52, signaling contraction risks and GDP growth slowing below 2%.

Structural & Long-Run Trends

The Irish services sector benefits from structural advantages: a skilled workforce, strong FDI inflows, and digital transformation. The PMI’s strength reflects these long-term trends, though demographic shifts and global competition require ongoing adaptation.

Policy pulse

ECB policymakers will monitor the PMI closely as a leading indicator of inflationary pressures and economic momentum. The strong reading may delay further rate hikes but also underscores the need for vigilance against overheating.

Market lens

Immediate reaction: The Irish government bond 10-year yield rose 5 basis points, reflecting slightly higher inflation expectations. The EUR/USD pair remained stable, indicating balanced market sentiment.

The December 2025 AIB Services PMI reading of 58.50 signals robust expansion in Ireland’s services sector, outpacing expectations and reversing summer stagnation. This strength supports a positive near-term economic outlook, though risks from monetary tightening and geopolitical uncertainties persist. Policymakers and investors should weigh these dynamics carefully as Ireland navigates a complex global environment.

Key to sustaining growth will be balancing fiscal prudence with targeted investment, while monitoring external shocks. The PMI’s trajectory suggests Ireland’s services sector remains a cornerstone of economic resilience and a bellwether for broader macro trends.