IRISH business activity strengthened over the final months of the year but firms remain cautious about what's coming down the road, a survey has found.
The winter KBC Bank Ireland/Chartered Accountants Ireland Business Sentiment study found that businesses were hesitant to ramp up spending and to take on new staff next year.
The survey also examined what business bosses thought of the Budget, concluding that it posed some threats for the year ahead.
Austin Slattery, Chartered Accountants Ireland president, said the improvement in sentiment was encouraging.
"Probably the most notable finding is that the balance between those companies reporting increased business and those reporting weaker conditions in the past three months remains positive," he said.
Mr Slattery emphasised that the survey wasn't suggesting a dramatic pick-up in business conditions, but indicated a gradual recovery was taking hold.
The survey was conducted between December 10 and 12 and the results presented are based on 344 completed responses.
Austin Hughes, chief economist at KBC Bank Ireland, said the strengthening in activity in the latter part of the year had translated into an increase in new hiring and a reduction in lay-offs.
"The emerging improvement in the Irish jobs market is modest but this is still very good news," Mr Hughes added.
"Firms remain cautious and are only filling new positions on the basis of clear needs rather than on expectations of stronger future activity."
Other key findings from the survey include:
• Activity balance at its strongest level since winter 2007.
• Budget 2013 seen as erring on the side of excessive deficit cut at expense of a fragile economy.
• Growth seen continuing in early 2013 but no marked strengthening is expected.
• In spite of increased activity, companies are slightly more pessimistic about the Irish economy, with international economy seen as the key uncertainty for Irish businesses next year.