Consumers and businesses have started the new year off on an optimistic footing, according to Bank of Ireland's latest Economic Pulse for the month of January.

Sentiment was higher among both households and firms, with Brexit pessimism - which dominated the outlook for so many months - dissipating with the election of a majority government in the UK.

This cleared the way for the Withdrawal Bill to be passed by the UK parliament, which removed the threat of a cliff-edge Brexit later this wee.

But Brexit is still playing out, with the future relationship and trading arrangements being dealt with in the next phase.

"We're at the end of the beginning," Loretta O'Sullivan, chief economist with Bank of Ireland, said.

"The worst case scenario of a no-deal Brexit has been avoided and this has provided some breathing space for households and firms. Households are more confident about the outlook for the economy and for their finances."

Indeed, some are expecting further pay increases this year and employers say they're expecting to give them with the average hike in pay coming in at 3.6%.

"It's higher on the services side. In there, you would have some of the tech firms, information and communication technologies and so on," the economist said.  

"If we look at the CSO data, it's coming in or around that mark for some time now reflecting a tighter labour market. We also have an increase in the minimum wage which will take effect in the coming weeks," she added.

The housing element of the index was down in January having risen towards the end of last year

"That's around house price expectations," Loretta O'Sullivan explained.

She noted some cooling in expectations again but 44% of those surveyed expect house prices to increase in the next year.

The survey was carried out before the election campaign kicked off and before the parties started to lay out their proposals for dealing with the housing market.

"It may be the case that as they come to fruition and talks on the formation of a government take place, there may be an impact on housing demand and price expectations," Ms O'Sullivan said.

"There has been speculation around changes to the help-to-buy scheme. The construction industry is particularly sensitive to uncertainty. The sector could be impacted by home grown uncertainty," she added.