Consumer confidence is back at pre-recession levels according to the latest monthly sentiment index from KBC Bank Ireland and the Economic and Social Research Institute (ESRI).

The January sentiment figure, based on telephone surveys with 800 consumers, was 84.6, up from 79.8 in December.

That is the highest figure for the index, which represents consumer attitudes to the overall economy and to their household finances, since May 2007.

The reading of 84.6 is also in line with the historical average of the sentiment index over its 18 year history.

KBC Bank Ireland chief economist Austin Hughes said, however, that this should not be interpreted as a sign that consumers felt current economic conditions were "normal".

"The circumstances facing Irish consumers have varied so much through this period that we can't interpret the January reading in this way. However, last month's results suggest consumers sense that some improvement from the difficulties of the past few years is taking hold," he said.

Mr Hughes cited improved perceptions about the labour market and falling unemployment figures as one significant reason for the rise in sentiment.

He also pointed to a post-Christmas boost due to seasonal sales which, he said, would push the index higher. 

"There is likely to be some reversal of this factor in the February data that might even mean a weaker reading overall this month. However, we think the underlying trend in consumer sentiment is still modestly positive and any setback is likely to be temporary," he said.