A tentative turnaround is emerging in the Irish economy with job creation expected to offset job losses in the coming months.
Irish business activity strengthened in the final months of 2012, with the result that employment growth seems to have turned positive, according to the Winter 2012 KBC Bank Ireland/Chartered Accountants Ireland Business Sentiment Survey.
KBC Bank Ireland’s chief economist Austin Hughes’s analysis of the data found that the strengthening in activity in late 2012 has translated into an increase in new hiring and a reduction in layoffs.
“The emerging improvement in the Irish jobs market is modest but this is still very good news. Firms remain cautious and are only filling new positions on the basis of clear needs rather than on expectations of stronger future activity. These results and the relatively modest gains in activity anticipated in early 2013 imply recovery is still quite hesitant but that is probably as much as can be expected in the current environment,” he added.
However, the report’s authors said it should be emphasised that the small positive balance doesn’t suggest any dramatic change in job market conditions of late.
“Instead, it seems that we have moved to a position of broad balance where new hiring is running at similar or possibly even a slightly faster pace than layoffs.
“These results are consistent with signals on the jobs market coming from the consumer sentiment survey of late. In both instances, recent results show a level of volatility around a slightly improving trend.
“This implies a turnaround is emerging but it is modest and uneven as firms remain reluctant to ramp up their payroll numbers given continuing uncertainty about the economic environment,” they said.
Mr Hughes also said the survey suggests Irish business sees Budget 2013 as posing some risks for the economy in the year ahead.
“Three times as many companies felt the budget erred in an excessive focus on reducing the deficit as though it was too focused on avoiding damage to short-term growth.
“Concerns about a fragile Irish economy also seem to inform answers given to another question that found 51% of companies think a weak Irish economy will cause tax targets to be missed in 2013 while only 15% think they will be met,” he added.
The report’s authors said the sense that moderate growth is likely to remain the norm in early 2013 is clearly conveyed by responses given by firms in the manufacturing sector.
“After reporting exceptionally strong activity in late 2012, these companies expect further growth in the early part of next year but the balance between positive and negative responses is altogether smaller in terms of expectations for the coming quarter than the experience they reported for the past three months,” they added.
President of the Chartered Accountants Ireland, Austin Slattery, said the improvement in business activity levels seen in the final months of 2012 is encouraging in several respects.
“Probably the most notable finding is the balance between those companies reporting increased business and those reporting weaker conditions in the past three months remains positive.
“Indeed this balance is now at its strongest level in five years. It should be emphasised that the survey isn’t suggesting any dramatic pick-up in business conditions but it does seem that a gradual recovery is taking hold,” he said.
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