The economy may already be overheating as fears about Brexit, skills shortages and political insecurity loom large, Ireland’s business directors believe.
The survey by the Institute of Directors (IoD) in Ireland also found business leaders identified housing and infrastructure, including high-speed broadband in the regions, as “critical priority areas” for investment.
“While business sentiment generally remains positive in Q2 and there are optimistic signs in expectations for domestic growth, it’s quite clear Ireland’s business leaders are concerned this growth is unsustainable,” said institute chief executive Maura Quinn.
“Combined with Brexit, severe talent shortages and political flux this makes for uncertain times for corporate Ireland.”
Most directors still favour the current Government and most want an extension in the Confidence and Supply Agreement with Fianna Fáil, but almost half of the 237 directors surveyed nonetheless believe there will be an election this year.
The IoD said the findings showed that directors had raised “a warning flag” about the risk of an overheating economy, as the Dáil goes into its summer recess.
Brexit remains a key worry. “It follows then that our nearest neighbour is seen as an increasingly less attractive market for growth, at 8% in comparison to Q1, at 19%,” the survey found.
“The most significant opportunities for growth are expected domestically, at 39%, followed by the EU, at 19%. The US has dropped from 18% to 7%. It is anticipated that emerging markets will provide significant opportunities for growth for just 7% of respondents,” the IoD said. The survey found directors expect new technology including automation will affect operations in the next five years. They also cited changing regulations and cyber-attacks as matters of concern.
The warning on an overheating economy comes as a separate report found that household spending in Ireland jumped at its fastest rate for almost two years.
Card payments firm Visa, which monitors all types of spending including cash purchases, said consumer spending jumped by an annual rate of 5.5% in June from a year earlier.
Buoyed by the good weather, household spending in Dublin was particularly strong. The fastest growing area of spending was for household goods, including garden furniture, while hotels, restaurants, and bars also gained from the surge in spending due to the heatwave.
“As Ireland enjoyed a heatwave in June, consumer spending continued to tell a positive story recording the fastest rise since July 2016.
“The good weather benefited the Irish high street in particular, with face-to-face spending marking the strongest increase since January,” said Visa Ireland country manager Philip Konopik.
Visa predicted that the continuing good weather this month and falling unemployment will boost spending in the coming months.
Separately, the CSO said that exports to the UK fell 10% to €1.18bn in May from a year earlier, amid a drop in exports of chemicals and similar goods. Exports to Britain also fell 8% to €5.52bn for the first five of the months from the same period in 2017. Imports from the UK fell 6% to €1.52bn from May 2017 but were up by 3% in the first five months, to €7.25bn, from the first five months of 2017.