Consumer sentiment surged to a 17-year high in January, suggesting consumers are starting to feel the benefits of an improving economy.

The Irish economy has posted the fastest growth in Europe since 2014 and unemployment has fallen rapidly, but the recovery has been uneven for some consumers with only modest gains in purchasing power. 

The latest KBC Bank Ireland/ESRI consumer sentiment index shot up to 110.4 in January from 103.2 in December.

This was the highest level since February 2001, which the survey's authors said pointed to an easing in the strains on household finances. 

"While the survey clearly highlights stronger sentiment of late and this is an unambiguously positive development for the Irish economy, we would be cautious not to overstate the significance of the seventeen-year high," KBC chief economist Austin Hughes said.

"The results are better seen as signalling a marked improvement in confidence of late rather than indicating that Irish consumers feel their circumstances are now better than at any time in the past seventeen years," he said. 

Austin Hughes said the survey was consistent with a healthy increase in consumer spending in the coming year and indicated concerns over Brexit were easing, but that did not mean the return of a boom. 

Sentiment usually registers a large monthly improvement at the start of the year, he cautioned, with January accounting for the largest monthly gains in four of the past six years. 

This seasonal effect could be reversed in the next month or two, the economist added.