BUSINESS ACTIVITY increased marginally in the third quarter of the year, though consumer sentiment showed renewed weakness, according to the latest Business Sentiment Survey from KBC Bank and Chartered Accountants Ireland.

While companies reported a modest improvement in their business volumes over the last three months, the quarterly report revealed a renewed softness in activity in those sectors supplying the domestic market.

The autumn survey suggests that business volumes are expected to increase again in the final quarter of 2012 but the pace of expansion is expected to be slower than envisaged three months ago. Uncertainty about economic outlook was pinpointed in the report as a major concern for businesses.

“Widespread and increasing uncertainty is leading to an economic ‘stand-off’ in which households and businesses postpone all but essential outlays until the economic environment becomes clearer,” the report states. It notes that firms are now likely to adopt more defensive positions in terms of spending and hiring.

The survey, which was carried out in the second week of October, also highlighted an increase in the costs facing companies, particularly in the food sector, with food and energy input prices rising during the period.

The forthcoming budget was regarded by companies as the single most important determinant of business prospects in the year ahead, according to the report. Some 30 per cent of respondents identified it as the key determining factor in the coming months, compared to 24 per cent who pointed to the euro zone crisis.

Access to credit was cited by 17 per cent of companies as the key issue for businesses, while 14 per cent cited the weakness of the US economy.