Strong improvement in business confidence so far this year

IBEC, the group that represents Irish business, today published the latest IBEC Business Sentiment Survey for Q1 2013, which reveals that business confidence improved strongly at the start of 2013, with the majority of indicators climbing to the highest levels since the survey started in 2009. Sales and order book indicators point towards growth, and one in four managers indicated that they would be hiring new employees in the coming quarter.

IBEC Chief Economist Fergal O’Brien said: “The improvement in confidence is predominantly due to recovery in the domestic economy. Consumer spending and business investment made a positive contribution to growth in the second half of last year and CEOs expect this trend to continue into 2013. The Irish economy is clearly re-balancing and it is very positive to see the sentiment readings for both domestic and export activity in positive territory in the first quarter of this year.

“Most importantly, business performance indicators – sales and order books in particular – are pointing towards growth. Both domestic and export sales outlook improved in Q1, with domestic sales expectations reaching its highest reading to date at +7 and export sales reaching +35.

In line with the improvement in sales expectations, the index for order books rose to +21 from the +15 recorded at the end of last year.”Key trends highlighted in the survey include:

• CEOs’ perceptions of the overall business environment rose to a series-high in Q1. The current conditions index rose to -6 from -14 the previous quarter and the forward-looking index increased to -4 from -13. This is the first time since the survey began that managers’ perceptions of the business environment have been close to neutral.
• Managers’ confidence in their own businesses improved to a new series high, with sentiment for current business at +19, up from +15 in the previous quarter, and confidence in the three-month outlook rising sharply to +23 from +10 at the end of 2012.
• The employee numbers index is now for the first time in the history of the series in the positive, reaching a high of +4, up from -2 in the previous quarter. One in four managers indicated that they would increase employee numbers in the coming quarter, up from one in five at the end of 2012.

“It now appears that sustained job creation is taking hold in the exporting sectors, and the index reading for these companies was +10. Last year saw an increase of 8,000 in the number of private sector employees. Given the positive reading from our employment index, which correlates well with the official labour market data from the CSO, we should see the trend of jobs growth continue and strengthen during 2013.

“To reduce the negative impact on growth and job creation, the remaining economic adjustment should be made by reducing expenditure and growing the economy. Irish workers are already taxed enough and there should be no further tax increases beyond those already announced. Tax increases were necessary due to the pressure on the public finances, but they should now end,” concluded Mr O’Brien.