Activity in the services sector expanded at the fastest pace in over five years in May, according to AIB.

Its latest Purchasing Managers' Index, a month-on-month check-up on conditions in the sector, pointed to a marked pick up in growth as pent-up demand was released with the loosening of pandemic restrictions.

The services sector accounts for around three quarters of all jobs in the economy and covers areas as diverse as technology companies, airlines, banking and business services.

Employment growth strengthened in May and the 12-month outlook among survey participants was at its most optimistic in almost four years.

Employment rose sharply in the Technology, Media & Telecoms and Business Services subsectors.

Transport, Tourism & Leisure registered only a marginal increase in staffing while job levels were largely unchanged in Financial Services, the report noted.

However, the survey also picked up on the strongest cost pressures for nearly 13 years, driven by range of sources including labour, fuel, insurance, Brexit, energy and freight charges.

"Prices charged to customers increased at a more moderate pace, pointing to a continuing margin squeeze in the sector," Oliver Mangan, chief economist with AIB said.

"Firms in all four sub-sectors, though, are very optimistic on the 12-month outlook, with the Future Activity index hitting its highest level since September 2017," he added.

Composite PMI registers fastest growth on record

The surge in manufacturing and services activity in May saw the combined output of the sectors rising at the fastest rate since since the data series was first compiled in 2000.

Goods production increased at a record pace, while services activity expanded the most since March 2016, the report noted.

Input price inflation accelerated for the fifth successive month in May, reaching the highest since July 2008.

Manufacturers continued to see much steeper increases in input prices than service providers, the report stated, although the differential narrowed in the latest period.