New figures from IIB Bank and the ESRI show that consumer sentiment improved in January from December, but it is considerably lower in comparison to the same month last year.
The figures show that the Consumer Sentiment Index rose to 67 in January from 62.7 in December. This is the first monthly rise since September and the largest improvement since April 2007.
Consumer sentiment improves every January as people think sales time is a good time to buy 'big ticket items'. The index usually falls again in February.
But individual components of the index suggest that consumers remain cautious and may have become more negative in their perception of the overall economy.
IIB said that while January's improvement is encouraging and may hint at a floor being reached in coming months, it is too early to signal a turnaround.
The bank says the main driver of the improvement in consumer sentiment last month was a marked improvement in the buying climate.
Although the improvement in consumers' willingness to buy big ticket items largely reflects substantial price reductions in the sales, IIB says it is still encouraging to see that consumers are willing and able to respond to lower prices.
'The bounce in consumer sentiment in January largely reflects a judgement by consumers that their own personal finances remain reasonably solid and should provide them a measure of shelter against a gathering economic storm,' commented Austin Hughes from IIB Bank.
'While the improvement in consumer sentiment in January is welcome, it would not be surprising if increased fears about economic activity and job prospects led to renewed weakness in sentiment in coming months,' he added.
