Irish consumer sentiment improved further in January as post-Christmas sales helped boost perceptions of the current economic climate and morale remained high after December's tax-cutting Budget.
The overall IIB Bank/ESRI Consumer Sentiment Index published today climbed to 93.2 from 89.8 in December, when it also rose, but was well below its January 2006 level of 106.2 and weaker than the 99.5 3-month moving average.
"The mood of Irish consumers brightened somewhat in January as Christmas sales boosted spending while a generous budget and lower oil prices also increased spending power," said Austin Hughes, chief economist at IIB Bank.
"While sentiment improved, there is little to suggest a surge in spending is underway as the average consumer still seems relatively cautious," he added.
The month-on-month rise in the index was due to consumers' assessment of current conditions, which jumped to 101.9 from 92.8 in December, more than offsetting a small decline in the expectations component to 87.3 from 87.7.
Mr Hughes said the overall tone of the index remained one of "guarded optimism" as consumers dealt with the latest interest rate increase, to 3.50 per cent in December, from the European Central Bank.
"Encouragingly, it seems that while consumers have become more cautious they are slightly more confident about their household finances in the coming year," he added.
With consumer price inflation currently running at close to 5 per cent a year, the Central Bank said this week that less vigorous domestic demand would help bring about a much needed taming of price pressures.
It also said fiscal policy had a key role to play in containing prices after a generous 2007 budget last month when Finance Minister Brian Cowen cut the top rate of income tax and ramped up spending ahead of the General Election later this year.