March saw a surprise sharp rise in consumer sentiment as Irish people looked for a 'fresh start' under the new Government.
The latest KBC Bank-ESRI consumer sentiment index increased from 50.3 in February to 59.5 in March - the strongest reading since last August. KBC Bank also said the change between February and March was the third largest monthly rise in the 15-year history of the survey.
But the bank said the figure is still well below the long term average of 89.3. 'The March outturn doesn't imply any irrational exuberance has taken hold of Irish consumers. However, it could hint at least tentatively that consumers may feel the worst could be over for the Irish economy,' commented the bank's chief economist Austin Hughes.
He said that Irish consumers remain very cautious and careful in their spending. 'The March reading certainly doesn't point towards any dramatic improvement in domestic demand in coming months,' he stated.
The economist said that even if people are somewhat less gloomy about their situation, they face major pressures on their spending power in the form of tax increases and cuts in benefits as well as the recent rise in inflation and the increase in mortgage interest rates.
'The improvement in sentiment is due, in part, to a move from more extreme views to a more central or a neutral outlook by respondents, suggesting that consumers remain cautious is their present circumstances,' commented the ESRI's David Duffy.
He added that over half of consumers still expect higher unemployment over the next year.
KBC said it should be known soon whether the March increase signals a lasting change in consumer attitudes or whether it is just a blip. The April survey period will cover the announcement of the Irish bank stress tests and the ECB rate rate.
