Irish business sentiment has jumped to a seven-year high, with more companies reporting a pick-up in activity and a more positive outlook.

According to the latest KBC Bank/Chartered Accountants survey, just over half of the companies surveyed reported an increase in their activity levels in the first quarter of 2014, which was four times the number that reported a drop in output.

As a result, the survey’s main index climbed to a level of 122.2, up from 121.8 in the previous quarter, and up from 87.3 in first quarter of last year.

The increase in business activity suggested “steady rather than surging growth,” the survey said, which is in keeping other indicators.

The survey, which is based on questionnaires completed last month, found firms selling into the Irish market reported stronger trading conditions of late, with 58 per cent of respondents indicating a rise in activity levels in early 2014 compared to 45 per cent three months earlier.

The study did warn, however, that while there are signs of improvement in key trading partners such as the UK and US, global economic conditions “remain somewhat fragile”.

KBC's chief economist Austin Hughes said: "This new business sentiment index suggests a recovery in Irish companies' operating environment has continued in early 2014 and is expected to gain momentum as the year progresses."

“It is particularly encouraging that domestic focussed companies are reporting improving demand of late. The pick-up in activity is mirrored in job gains while costs remain subdued.”