Irish economy shows early signs of a return to stability

 Based on a mix of over 800 small and medium enterprise (SME) respondents, across different sectors, business expectations showed a positive move upwards by 19 points to zero.
Having zero expectations is actually pretty good, given what many SMEs have been through. The survey is about the trend, rather than the outcome. Business confidence is up 12 points but still remains in negative territory at -5.
Two distinct economies, of exporters and non-exporters, are highlighted in stark contrast. Retailers’ profit expectation remains stubbornly bad at -39. Exporters are leading the way in business confidence recording 19 points (a rise of 20) and their expectations are up 26 to 18 points.
Current sales across all categories are up 13 points, but still at -7. Future employment prospects are up 11 points to zero.
However, when it comes to current and future investment, somebody plans to spend some money. These have shown increases in current investment from +4 to +18, while future investment is up 7 points to +16 points.
This shows that SMEs are trying to do things differently from before, and trying to invest in their businesses either to stay afloat in some cases, or to expand and grow in others. As exports remain quite strong for the economy, SMEs connected with that activity will continue to do fairly well, despite the on-going challenges.
Retailers will tell you that despite the issues they faced, many of them have invested in their businesses. They have tried to improve things, or in some case they have had to put more of their own money into the company to keep the door open.
It is surprising that so many SMEs in the survey are very negative about the business environment but not so negative about their prospects for employment or in the confidence indicator.
This reflects a frustration on their part that the Government is not doing enough to improve the environment in which they do business and in the absence of new measures, they are having to do more on their own.
ISME has published a list of recommendations to improve things, including re-negotiating the Croke Park deal and the repayment of Ireland’s national debt. But they want specific things like, cuts to Government-related business costs, greater outsourcing of state sector services to SMEs and the immediate introduction of the Government’s proposed “Plus One” initiative to incentivise new employment.
Exporting companies may feel the wrath of a slowdown in the Eurozone and US economies. But they are a lot more optimistic. Unfortunately, firms exposed to the domestic economy tend to have the capacity to take more people off state benefits when things go right.
It seems there will be jobs in Ireland in 2013, and some pretty good ones, but just not enough.
SMEs are still facing a tough year, but it is reassuring to hear ISME strike a positive note at the start of a new year.