Irish business sentiment shows "faint glimmers of light" according to a survey of business prospects for the next three months, despite activity levels continuing to weaken and more jobs being cut. Meanwhile, General Electric (GE), the world's biggest industrial group, says it has started to see the first “glimmers of hope” in the world economy.
The latest quarterly Irish business sentiment survey was published by KBC Ireland and the Institute of Chartered Accountants in Ireland (ICAI), shows that even though business activity levels have weakened further over the first quarter of the year, with construction and consumer-focused companies particularly hit, companies are slightly less negative in their outlook, but still expect the economic downturn to continue for more than the next 12 months.
Over 70% of companies surveyed said activity had deteriorated further, while the job situation is also still bleak.
The survey reflects the view of chartered accountants working in senior positions (CEO’s, MD’s and FDs) in Ireland’s leading companies. The survey was completed in the second and third weeks of March and the results presented are based on 350 completed responses.
Commenting on the survey Austin Hughes, Chief Economist at KBC Bank Ireland said "the Spring 2009 survey results present a snapshot of an Irish economy in which sharply lower construction activity and a dramatic pull-back in consumer spending are weighing on the vast majority of businesses. While many firms have adjusted their output levels to poorer conditions at home and abroad, a painful process of job shedding is continuing across a wide range of companies.
"If the general picture is gloomy,’Hughes added ‘there are faint glimmers of light that bear close watching. Importantly, companies are slightly less pessimistic about the outlook for the coming quarter than they were three months ago. This is a welcome if surprising result. In addition there has been a dramatic easing in cost concerns of late with the majority of firms reporting their costs have fallen in the past three months. So, it appears that many Irish companies may be well advanced on a necessary, if painful, restructuring of their businesses to a harsher economic climate."
"The survey contains some welcome good news for Government in that it signals overwhelming support for the decision to introduce an emergency budget,"said Ronan O’Brien, Communications Director at the Institute of Chartered Accountants in Ireland. "The survey also carries a clear message that the upcoming budget should not solely rely on higher taxes to turn around the problems in the public finances. There is also broad agreement that significant cuts in day-to-day Government spending are needed. Significantly, in contrast to previous surveys there is a willingness to contemplate a reduction in infrastructure spend. For corporate Ireland, improving infrastructure is a critical element in improving competitiveness. That said, the fact that a majority favour reductions in capital spending underlines how strong the view is that decisive action is needed on April 7th."
As debate intensifies as to how severe the upcoming budget should be, O’Brien pointed out that the survey acknowledged budget retrenchment is not without risks. "If there is a widely held view that the upcoming budget must take firm action, there is also a strong plea that the strategy Mr. Lenihan adopts must avoid damaging an already fragile Irish economy. Irish business clearly believes that a poorly constructed budget adjustment could backfire by weakening the economy in a manner that results in the budget deficit rising rather than falling."
The Financial Times reports today, that GE has started to see the first “glimmers of hope” in the world economy, according to a senior executive at the US conglomerate.
Nani Beccalli, who as chief executive of GE International is in charge of all its business outside the US, said he saw several encouraging bits of economic data from round the world.
These included “signs of life” in the US and European retail sectors and improving profits among European banks as foreign competitors leave the market.
Beccalli said: “The first glimmers of hope are there. This is the inversion of trends, which for a long period have been going down. The glimmers weren’t there two months ago”.
The FT says his comments are among the first from a bellwether company about signs of stabilisation in the economy.
He pointed to positive data, including the recent rise in the Baltic dry shipping index, which acts as a proxy for global trade, and to increasing housing sales in the US in February.
But he added: “This is not the light at the end of the tunnel but rather some little sparkles.”
