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Business confidence plummets on inflationary pressures

By July 18, 2022No Comments

Business confidence here has dropped sharply to its lowest level since October of 2020 as a result of concerns about the impact of strong inflationary pressures on demand, according to the latest Accenture/S&P Global Ireland Business Outlook.

This drop in anticipated demand coupled with sharp price increases has also driven predictions of falling profits.

Expectations around employment and investment have also been scaled back, the research has found, although Irish sentiment on employment remains the highest in Europe.

This was despite Irish firms scaling back their plans to increase employment since the February outlook survey.

The findings are based on a survey conducted by S&P Global on around 12,000 manufacturing and service providers across the globe, including 600 here in Ireland.

“As we emerge from a turbulent two years, it is unsurprising to see the effects of global events reflecting in a more volatile business environment,” said Alastair Blair, Accenture’s country manager for Ireland.

“However, there has been a remarkable amount of innovation and investment in the Irish business landscape, with hiring intentions in Ireland still the strongest in Europe. “

The net balance for business activity in the combined manufacturing and services sector fell sharply between February and June, the study found.

In fact, the downgrading of expectations in Ireland was the second-strongest globally, behind only Germany.

The concerns were most strongly felt in the manufacturing sector, where in particular growth forecasts were at their lowest level since the global financial crisis.

Some firms said they were concerned about the potential for recession when they were probed about the threats and opportunities they face.

Inflation, securing staff, materials shortages were other worries highlighted by participants.

Cost pressures remain high, with the net balance for non-staff costs hitting a new peak of +66% and firms continuing to predict higher output costs as the pressure is passed through.

On the upside though, there was some optimism about the impact new product developments and investment would have, as well as hope around improvements to economic conditions.

However, the outlook for investment – including for capital spend – was revised down because of the cost environment.

“The challenge for businesses now is to find ways to remain competitive through innovation, investment in technology and by having the best mix of skills, and investing in those skills, to deliver long term sustainable growth,” Mr Blair said.

Article Source: Business confidence plummets on inflationary pressures – Will Goodbody – RTE

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