RECENT indications that the worst of the economic difficulties are somewhat behind us have been given a timely boost as Irish businesses feel support the notion that the downturn has leveled out and we are on the road to recovery.
A new survey in conjunction with KBC Bank and Chartered Accountants Ireland reveals that the pace of activity has continued to weaken in companies during the second quarter but that the decline was notably less than in the first three months of the year.
The Business Sentiment Survey finds that, although trading conditions are still deteriorating, just over half of respondents say the decline in their business is “easing or bottoming out”.
Roughly one in five companies say they expect stronger trading conditions in the coming quarter, while almost half foresee a further drop in volumes.
“Viewed in isolation, this implies that the third quarter of this year will remain a difficult period for the Irish economy, says KBC economist Austin Hughes.
“However, forward looking activity measures are more encouraging than in any of our three previous surveys.”
Some 59 per cent of firms still reported reduced activity levels in the latest survey, while just 16pc indicated an improvement in business volumes.
“While all segments reported more companies experiencing weaker rather than stronger conditions, responses from firms in business sectors and non-food manufacturing as well as the public sector tended to be less negative than others,” says Hughes.
Two out of three companies also reported a decline in their operating costs in the second quarter.
“Results for the past four quarters suggests that the transformation in costs has been even greater than the scale of turnaround seen in activity and jobs,” he says.
“This is likely to remain the case in the next three months. Roughly half of all firms surveyed expect further declines in their cost base while only one in 20 see costs increasing in the coming quarter. Clearly, these results point to further downward pressure on Irish consumer prices over the balance of the year although forward looking responses also hint future reductions may be more modest than those in the first half of 2009.”
One in five respondents to the survey overall now feel the downturn will end within 12 months compared to only 1 in 16 at the time of the spring survey.
“Roughly, one in 10 companies expect to increase their payrolls compared to four in 10 which envisage a further reduction.”
