Irish Business sentiment hits nine year high

Oct 30, 2015

Autumn 2015 KBC Bank Ireland / Chartered Accountants Ireland Business Sentiment Survey

Main points:

• Strong business volumes and increased optimism about Irish economy boost confidence.
• Broadly based increases in activity prompt increased hiring and some increase in costs.
• Greater confidence in domestic economic trends now emerging.
• Budget 2016 not the key influence on 2016 business outlook but will support jobs.

Irish business sentiment strengthened significantly in the third quarter of 2015 reflecting companies’ own experience of increased activity levels and their greater sense of optimism about the outlook for the broader Irish economy. So, the survey reflects buoyant ‘micro’ conditions and increased confidence about the ‘macro’ environment.

The KBC Bank Ireland/ Chartered Accountants Ireland Business Sentiment Index increased to 130.8 from 123.6 in the previous quarter. This is the strongest reading since the survey began in late 2006. The results suggest the upswing has become more broadly based of late and firms are increasingly confident that this will continue in the final months of 2015.

There was a marked step-up in Irish business activity levels in the past three months with more companies reporting output gains and fewer reporting reduced output than at any other time since the survey began nine years ago.

The KBC Bank Ireland/Chartered Accountants Ireland business sentiment survey also included a number of supplementary questions focussed on Budget 2016 and its significance for corporate Ireland.

The survey asked how important companies considered Budget 2016 was to the outlook for their business in the coming year relative to a range of other external influences. The responses suggest that Budget measures are not generally regarded as the key determinant of business prospects for 2016. With export market trends the most widely cited influence and cost trends and currency movements also prominent in responses, a capacity to successfully buy and sell on world markets is seen as the main driver of the fortunes of corporate Ireland.

Commenting on the results, Chartered Accountants Ireland Chief Executive Pat Costello said:

“The autumn survey suggests the economic upswing is now being felt much more broadly across the spectrum of Irish business with less than 6% of companies reporting weaker activity levels in the past three months, the lowest number in the nine years of the survey. In addition to this improvement in their immediate operating environment, firms are also more confident about the broader outlook for the Irish economy as a whole. So, both ‘micro’ and ‘macro’ factors are encouraging a rise in business sentiment.”

“A continuing pick-up in business volumes has seen costs edge slightly higher for a rising number of firms with 46% of respondents reporting their cost base had increased in the past three months.  As this was most evident in respect of domestically focussed firms such as those in the construction sector, it seems to reflect difficulties in scaling up activities at a sufficient pace to match rapidly recovering demand.  In contrast, firms in areas such as manufacturing reported marginally less cost pressures of late.”

Austin Hughes, Chief Economist, KBC Bank Ireland, who carried out the analysis, said:

“A further step-up in activity levels has prompted more broadly based employment gains with 45% of firms reporting increases in their payrolls in the past three months. Perhaps surprisingly, the number of firms reporting a decline in headcount edged up to 11%. This may owe something to signs of emerging shortages of skilled staff in certain sectors but it also likely reflects the ‘new normal’ in which some firms may remain under pressure even in a generally healthy business climate.”

“Budget 2016 is seen as less critical to the outlook for Irish business than a range of other factors many of which relate to the ability to trade successfully on international markets. The survey suggests that now that Budget measures are no longer subtracting from spending power or adding to business costs, they become less of a focus. However, a not insignificant 13% of companies suggest that measures introduced in Budget 2016 make it more likely that they will take on additional employees in the coming year.”

ENDS

Note to editors:

The KBC Bank Ireland / Chartered Accountants Ireland Business Sentiment Survey reflects the view of chartered accountants working in senior positions (CEOs, MDs and FDs) in Ireland’s leading companies. The Autumn 2015 survey was conducted between 14th and 20th October and the results presented are based on 363 completed responses.

Read the full report here.