Consumer confidence rose to a surprising 14-month high in June indicating a belief that their worst fears for the economy may not be realised.
The KBC Ireland/ESRI measure of sentiment rose to 53.4 in June from 45.5 in May as a slowdown in the rate of job losses and an easing in the fall of tax revenues combined with an interest rate cut by the European Central Bank (ECB) in May to reassure consumers. Any reading over 50 indicates growth.
Austin Hughes, chief economist at KBC Ireland, said the scale of the improvement was surprising and could easily be partly reversed over the coming months
However, he said the June reading builds on a positive trend of recent months and "hints that the worst may be over".
"The sentiment index is still saying that Irish consumers are fairly nervous but they seem to have drawn some encouragement from signs of 'green shoots' abroad and very faint signs that some domestic indicators may be starting to stabilise".
The survey was carried out during the first two weeks of June meaning it included the full impact of the tax and levy increases in April's supplementary budget and the impact of the 0.25 per cent cut in interest rates to a record low of 1 per cent.
Mr Hughes said a more accurate gauge of the underlying trend might be evident from the three-month moving average of the series which rose to 48.5 in June, from 45.5 per cent in May.
He noted that the increase was in line with other countries particularly the US where the comparable indicator has risen to its strongest level since February 2008.
While the Irish index showed a more positive outlook for job prospects and the economic outlook the June reading also contained some downbeat assessments with two thirds of consumers having a negative view of the economic outlook for the next year.
Mr Hughes said households had become more optimistic about their purchasing power due to falls in mortgage repayments and ongoing price-cutting by retailers, although he noted consumers felt it was a poor time to make large purchases, in part due to anticipated further discounting by retailers.
