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KBC Bank Ireland

Irish business activity increasing but consumer sector displaying renewed weakness - survey

Concerns over the eurozone and the upcoming Budget are hitting companies expansion plans, say KBC Ireland/Chartered Accountants Ireland

BUSINESS ACTIVITY HAS increased in Ireland in the third quarter of this year – but the pace of the improvement has slowed alongside hesitant recovery in the jobs market, according to the the Autumn 2012 KBC Bank Ireland/Chartered Accountants Ireland Business Sentiment Survey.

Austin Slattery, President of Chartered Accountants Ireland, said that a “marginally” greater number of companies were reporting higher rather than lower output levels of late – and that while further growth is expected in the final quarter of 2012, firms are notably more cautious than they were three months ago. As such, they are opting to monitor the sector rather than stepping up output and employment.

“Unfortunately, as both Irish companies and consumers appear cautious and unwilling to commit to increased spending at present, this suggests any recovery will remain lacklustre,” he said.

The survey also found that:

  • Domestic activity may be stabilising but the consumer sector is showing renewed weakness
  • Hesitant recovery means job market remains under pressure
  • Increased uncertainty seen as the major problem for Irish business at present—leading to spending and hiring being postponed

Chief Economist at KBC Bank Ireland, Austin Hughes, noted that the most notable difference between this survey and that of three months ago relates to the responses given by companies focused on the domestic market, particularly those trying to sell goods and services to Irish consumers:

The Summer survey suggested some tentative signs that this sector might be bottoming out after nearly five years of continuous decline. Unfortunately, the Autumn survey found renewed weakness in this area. This may reflect increased nervousness about the damage another tough Budget could do to spending power and consumer morale.

Slattery stated it was “not entirely surprising” that the Autumn survey should point towards a hesitant recovery, but noted the significance of the concern companies were expressing regarding the impact on the increased uncertainty on their businesses. He said that worries about the health of the wider global economy, coupled with worries over new measures to be introduced in Budget 2013, were hitting companies expansion plans.

“This uncertainty has hit domestic focused firms hardest, presumably because the conditions they face are already so fragile that any further deterioration could have a particularly harmful impact,” he said.

Hughes agreed that the circumstances made it “very difficult” for Irish businesses to plan for the year ahead. He noted:

  • 30 per cent of firms see the upcoming Budget as being the most important influence on their business environment in the coming year
  • 24 per cent regard the euro crisis as the most critical influence
  • 17 per cent identified access to credit as the most important factor
  • 14 per cent cited the weakness of the US economy as critical to their outlook

By comparison, the health of the UK economy or the level of ECB interest rates are regarded as relatively unimportant, at 6 per cent and 2 per cent respectively.

Read the full KBC Bank/Charted Accountants Ireland report>

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