Consumer sentiment rose to a new 10-year high in December, buoyed by expectations of a stronger economy and healthier personal finances this year.

The latest KBC Bank Ireland/ESRI Consumer Sentiment Index showed a marginal increase last month, rising to 103.9 from 103.1 in November and bringing the indicator to its strongest level since January 2006 when it stood at 106.2. The three-month moving average also increased from 101.7 in November to 102.8.

December's increase in sentiment was the third monthly gain in a row and according to KBC chief economist Austin Hughes, showed a more consistent trend in sentiment given that the index showed decline in four of the eight months between January and September of last year.

“The limited monthly change in the confidence index suggests the average Irish consumer isn’t seeing any dramatic improvement in their circumstances at present but there is a clear sense that in terms of the outlook for jobs and household finances things are moving in the right direction and consumers are facing into 2016 on a broadly positive note,” he said.

December’s gain was largely attributed to low inflation with falling energy costs and heavy price discounting by retailers seen as supporting household spending power.

“Irish consumer sentiment has been set on a path of steady if modest improvement in recent months. The details of the December reading show modest gains in four of the five components of the sentiment index and a marginal decline in the other. So, there is little suggestion of any sea-change in the thinking of Irish consumers of late,” said Mr Hughes.

“In an extremely uncertain world, they expect positive influences to dominate negatives in the coming year both in relation to the Irish economy and their household finances but not to a degree that would that would transform either,” he added.