The latest KBC Bank Ireland/Chartered Accountants Ireland business sentiment index has been released today. The survey reflects the view of Chartered Accountants working in senior positions (CEOs, MDs and FDs) in Ireland’s leading companies. The winter 2016 / 17 survey was conducted from 17th to 24th January 2017 and the results presented are based on 371 completed responses.
The index shows that Irish business sentiment improved at the start of 2017 following a marked decline through 2016 as companies’ activity levels proved more resilient than had been feared and concerns about the broader Irish economy eased a little.
The index rose to 104.8 in the winter quarter of 2016/17, a modest improvement from the 100.1 reading in the autumn survey and still well below the peak reading of 131.1 recorded a year ago. As the survey took place from January 17th to 25th, these results should be seen as representing Irish business thinking in early 2017.
Irish based firms expect growth in their business volumes in the months ahead, but there are signs of a more cautious approach to hiring. This may owe something to an increasing focus on accelerating wage costs but it also likely reflects heightened uncertainty about the implications for their businesses of Brexit and the new Trump administration in the US.
The survey suggests that modest pay increases are likely to be the norm for most firms in 2017. Four out of five companies surveyed say they will raise average pay rates with about half of these envisaging increases of less than 2%, and a broadly similar number planning increases of between 2% and 5%. Fewer than one in twenty firms see average pay rising by more than 5%, while about one in six don’t see any increase in their average pay this year.
Firms may opt to take a cautious or defensive approach to their business planning for the coming year. This would be consistent with the more cautious approach to hiring even in the face of an anticipation of notably stronger activity levels in the coming quarter. In this, and some specific sectoral responses, the survey suggests heightened uncertainty may already be constraining Irish business growth in early 2017.
Commenting on the research, Chief Economist at KBC Bank Ireland, Austin Hughes said, "Irish business sentiment has started 2017 on a positive note as companies’ activity levels proved to be a little stronger than had been feared in late 2016 and expectations for output volumes in coming months remain promising. In a more ‘normal’ recovery, expansion plans would now be ramped up, but the survey suggests increased uncertainty of late about the impact of Brexit and more recently the prospect of a major policy shift in the US."
He added, "This reflects the importance of the US to many Irish based businesses. One in three firms envisage some impact from the Trump administration on their activities, with negative concerns outweighing positive expectations by a factor of about seven to one."
Source: www.businessworld.ie
