An Illawarra Information Service (IRIS) business survey at the end of December reported an extremely positive shift in business conditions for local enterprise that was expected to flow into the new year.

Executive officer Simon Pomfret said the research for the December quarter showed trading conditions, employment, overtime and profitability were all encouraging.

There was a small drop in the number of organisations investing in capital expenditure but the trading conditions index rose 24.4 percentage points to record the highest result since December 2007.

The most encouraging figure in seven years saw a net 25.8 per cent of local businesses recording stronger trading activity.

"This recovery in trading during the past three months has had a direct positive impact on employment and profitability levels," Mr Pomfret said.

In fact the profitability index climbed 9.1 percentage points.

The result means the net percentage of firms recording stronger profits to break out of negative territory had climbed to 3.8 per cent.

Mr Pomfret said the encouraging thing was the profitability index strengthened further for all sectors "and is expected to reach a net 5 per cent of businesses recording positive conditions during the March 2015 quarter".

Local businesses also reported an improvement in the employment index compared to the September quarter.

The net 2.9 per cent improvement in staffing levels also saw that index break out of negative territory.

Mr Pomfret said the March quarter expectations for January, February and March also looked very optimistic.

He said the IRIS research showed a net 8.4 per cent of businesses expected to take on more staff, which was up 7.4 percentage points on the previous expectation levels for the October, November, December period.

"The proportion of Illawarra businesses engaging in 'at least some' capital expenditure has again dropped marginally, relative to the September quarter, with 29.7 per cent of businesses continuing to invest, which is 2.5 percentage points below the long term December quarter average," Mr Pomfret said. "A net 29.1 per cent of firms are anticipating investing in capital during the March 2015 quarter."

The IRIS research shows the amount of overtime available to the region's workforce increased during the December quarter when 39.7 per cent of local firms reported "at least some" overtime was available to staff. However a slight contraction was expected for the March quarter, with 31.8 per cent of businesses planning to offer overtime.