The services sector stayed in contraction in February as restrictions remained in place, according to AIB's latest measure of activity.

The Purchasing Managers' Index measures activity on a scale of 0 to 100 with anything over 50 signalling contraction in a sector.

February's score registered at 41.2, indicating another sharp drop in services output, albeit at a slower rate of decline than in January when the measure was 36.2.

The services sector covers areas as diverse as business and financial services, Transport & Tourism and Technology, Media and Telecoms.

Business activity and new work both continued to fall sharply, albeit at weaker rates than in January. 

And in a positive development, the 12-month outlook brightened greatly as firms expect a revival once restrictions are lifted and vaccines are rolled out in greater numbers.

Cost pressures built up but remained below par, while charges declined further as firms sought to remain competitive.

The strongest upward pressure on firms' input costs in three months was captured in February.

Sources included UK customs charges, fuel, insurance, wages, and higher shipping costs in general due to the impact of the pandemic on supply chains. 

However, input price inflation remained below the long-run survey average, especially for business and financial service providers.

"The impact of the continuing lockdown was very evident in a further decline in new business in the month, as tight restrictions suppressed demand, both domestically and in the UK in particular," Oliver Mangan, chief economist with AIB said.

"Hope springs eternal, though, with expectations for the 12-month outlook rising sharply to the strongest level in over a year. Firms expect that the roll out of the vaccine programme will see lockdown restrictions gradually lifted, leading to a rebound in business activity as the year progresses, a clear ray of hope in an otherwise weak survey," he added.