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How resilient are Irish SMEs to input cost inflation?

Author

Listed:
  • Adhikari, Tamanna

    (Central Bank of Ireland)

  • McGeever, Niall

    (Central Bank of Ireland)

Abstract

The trading performance of Irish small and medium enterprises (SMEs) has thus far proven resilient in the face of significant input cost inflation. Turnover levels increased in 2022, with firms passing on cost increases to customers. Higher prices and exceptionally strong consumer demand broadly allowed most firms to maintain or even increase their profit margins, though a fifth of the firms saw their margins fall. Simulation evidence suggests that profit margins would remain robust in 2023 under baseline projections. Nonetheless, our analysis shows that profit margins would be sensitive to a slump in consumer demand and persistently elevated costs.

Suggested Citation

  • Adhikari, Tamanna & McGeever, Niall, 2023. "How resilient are Irish SMEs to input cost inflation?," Financial Stability Notes 6/FS/23, Central Bank of Ireland.
    • Handle: RePEc:cbi:fsnote:6/fs/23
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    File URL: https://www.centralbank.ie/docs/default-source/publications/financial-stability-notes/how-resilient-are-irish-smes-to-input-cost-inflation.pdf?sfvrsn=51289e1d_7
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    References listed on IDEAS

    as
    1. Byrne, David & McCann, Fergal & Gaffney, Edward, 2023. "The interest rate exposure of mortgaged Irish households," Financial Stability Notes 2/FS/23, Central Bank of Ireland.
    2. Arrigoni, Simone & Boyd, Laura & McIndoe-Calder, Tara, 2022. "Household Economic Resilience," Quarterly Bulletin Articles, Central Bank of Ireland, pages 88-113, October.
    3. Andrew Glover & Jose Mustre-del-Rio & Alice von Ende-Becker, 2023. "How Much Have Record Corporate Profits Contributed to Recent Inflation?," Economic Review, Federal Reserve Bank of Kansas City, vol. 0(no.1), pages 1-13, January.
    4. Morell, Joe & Shaw, Frances & Lyons, Paul & McCann, Fergal, 2022. "Rising interest rates and higher inflation: implications for the banking sector," Financial Stability Notes 15/FS/22, Central Bank of Ireland.
    5. Adhikari, Tamanna & Yao, Fang, 2023. "Household resilience to expenditure and debt service channels under current inflationary conditions," Financial Stability Notes 3/FS/23, Central Bank of Ireland.
    6. Adhikari, Tamanna, 2022. "Inflation and mortgage repayments: the household expenditure channel," Financial Stability Notes 6/FS/22, Central Bank of Ireland.
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