The gap between between improving
‘traded’ sectors gaining from a recovery in exports and weakening Irish domestic
demand is increasing, according to the Winter 2010 KBC Bank / Chartered
Accountants Ireland Business Sentiment Survey.
The survey suggests that within healthier sectors the recovery
may be broadening as well as moderating in pace. More significantly, the survey
points to a pick up in the number of firms in business to business service areas
reporting an improvement. This likely reflects the importance of internationally
traded services as well as the downstream effects of stronger exports on other
The fourth quarter survey also saw a notable strengthening of
business conditions within the food sector where a strong majority of firms
reported a pick up in activity levels in the past three months.
On the negative side, the survey provides evidence that firms
focused on construction and Irish consumers found things got even tougher. The
number of firms in consumer related areas reporting a weakening in business
volumes increased to almost a half of those surveyed from around one third in
the previous quarter.
Property related firms also reported a notable recent weakening.
These results suggest that the further deterioration in Ireland’s financial
health in the past three months that culminated in EU/IMF assistance and a
notably larger budget adjustment in 2011 and beyond have taken a toll on
household and business spending plans.
2010 ended on an weaker note than many domestic focussed firms
might have envisaged.
Business activity broadly steady
at end 2010 but conditions vary widely between sectors.
Gap between improving ‘traded’
sectors and weakening domestic demand increasing.
Slight improvement expected in
early 2011 but divergences set to widen further.
Employment falls modestly as
downward pressure on costs intensifies.
€6bn budget cuts judged about
right but business feels tax increases went too far.
Government economic forecasts
felt to be ‘slightly’ too optimistic but majority feel 4 year plan provides
a reasonable framework.
61% of businesses feel EU/IMF
assistance improves Irish economic outlook while 16% think it worsens
Slight majority (56%) also feel
Ireland’s membership of EMU has helped economy through crisis but 30%
Opinion split on whether ECB has
helped or hurt Irish economy.
The survey was conducted between 8th and 16th December and the
results presented are based on roughly 360 completed responses.