Irish consumers' mood brightened in January buoyed by big discounts in the Christmas sales, though consumers are less optimistic than at the start of last year - according to a new survey.
The IIB Bank and ESRI consumer sentiment Index increased to 93.2, from 89.8 in December.
Although sentiment has been on an improving trend since the Autumn, the scale of gain has been modest, with the index well below the January 2006 reading of 106.2, and the historic average of 101.2.
Also, consumers are cautious on the year ahead with the forward looking expectations index falling marginally to 87.3 in January from 87.7 in December.
Despite the recent generous budget and the looming maturity of SSIAs, consumers are reluctant to get into more debt, due to higher interest rates and big December credit card bills.
IIB Bank says that although conventional macro economic measures such as GNP growth, employment and tax revenues improved - higher borrowing costs and increases in energy bills meant that many households experienced an unexpected squeeze on their spending power last year.
IIB bank said that in the next month or two sentiment could remain subdued, with a spate of high profile job cuts denting consumers' perceived employment prospects in January.
David Duffy of the ESRI said improvements in consumers perceptions of current situation as always improved in January, partly due to the winter sales, and he expects a more subdued figure in February.
He said the picture of a consumer who is more confident, but cautions, ties in with a gentle slowdown in mortgage borrowing in December central bank data, as consumers respond to interest rate increases.
IIB Bank economist Austin Hughes said the easing in mortgage borrowing is fairly orderly which bodes well for a solid economic performance and the hoped-for soft landing for the property market in 2007.
He added that a gloomier assessment of household finances over the last year seems consistent with evidence of a build up in credit bard debt in December, and it might also hint that the post Christmas sales buying climate was not as strong as in previous years.
However, he added that it seems that while consumers have become more cautions they are slightly more confident about their household finances in the coming year.
