The Institute of Directors has today published the results of its Business Opinion Survey for the first quarter of 2002 which showed a slip in company performance, lower capacity utilisation and weaker profits, despite better output growth over the past three months and a sharp recovery in optimism.

Forum Response: Institute of Directors

Ruth Lea, Head of the Policy Unit, told ePolitix.com: "Our latest survey, on the whole, suggests that the economy is recovering despite some weaker numbers for company performance. Business optimism has 'perked up' after collapsing in December - though we believe that much of December's slump was a instinctive reaction to events of 11 September so the figures should be interpreted with some caution.

"The improvement in export orders is especially encouraging. Another encouraging feature is the sign that manufacturing may be picking up after, what has undoubtedly been, a nasty recession. Margins throughout the economy are, however, still being squeezed by cost increases outstripping price increases.

"We now expect GDP growth of around 2 per cent this year, with growth coming from both the public and the private sectors, and inflation, on the whole, should remain benign for the rest of the year. But, given buoyant consumers, a hot housing market and assuming a fairly neutral budget, we expect higher interest rates this year. The first hike is likely before the end of June."