Irish business sentiment at highest level since crash

Business sentiment jumped to an eight-year high in the first quarter, with more firms expressing confidence in the future direction of the Irish economy than at any point since the crash.

The latest KBC Bank Ireland/Chartered Accountants Ireland survey also indicated the number of firms reporting a difficulty in finding “suitably qualified employees” increased to its highest level since 2006, suggesting a tightening of the labour market.

The survey’s main business sentiment index rose to 127.7 in the first three months of the year, up from 124.3 in the previous quarter, marking the highest reading in the survey’s eight-year history.

It suggested an upsurge in economic activity – as evidenced by the 4.8 per cent jump in gross domestic product last year – was easing concerns about the wider economy.

Domestic demand

However, softer-than-expected domestic demand, increased competition and the regulatory burden were still cited as issues.

Growth eased marginally in the past three months and employment growth picked up as firms expect increases in activity in the next three months.

For the past six or seven years the pace of job growth has been largely determined by demand conditions, the report noted.

However, the spring survey contains “at least tentative evidence” that supply factors may now be starting to exert some influence on the pace of hiring.

It found the number of companies reporting a decline in suitable job candidates has increased to its highest level since the autumn of 2006.

While most firms said they were not seriously concerned about political uncertainty with the next Irish general election less than a year away, they expressed concern that it may weigh on domestic demand.

Costs

In terms of costs, the share of companies reporting higher input costs continues to edge upwards.

This was most notable in sectors such as food and other manufacturing where a weaker exchange rate may be boosting the cost of imported inputs, the survey noted.

Companies in the construction sector also indicated higher costs as that industry scales up activity levels. However, firms in the business services area and companies focused on consumers reported some easing in cost increases of late.