Irish consumer sentiment rose to its second highest level in eight years in December, new figures show.

The latest KBC Bank Ireland/ESRI consumer sentiment index rose to 90.5 per last month from 85.3 in November. Although this is below the recent peak of 92.8 recorded in September, it is the second highest reading since January 2007.

Austin Hughes, chief economist with KBC Bank Ireland cautioned that while the survey suggests an improvement in the circumstances of consumers, the index also emphasises that the recovery is uneven and tentative.

“Budget 2015 measures, extremely low inflation, greater clarity on water charges and the impact of healthier jobs and property markets market are starting to figure in thinking on the outlook for personal finances in the year ahead. That said, consumers remain notably more cautious about their own financial situation than the condition of the Irish economy as a whole,” he said.

The rise in Irish consumer sentiment last month was broadly based with four of the five main elements of the survey posting monthly gains and the fifth largely unchanged from November. The strongest improvement was in relation to the outlook for household finances in the coming year.

"Taken as a whole, the December survey results suggest that Irish consumers are gradually growing more confident. The most encouraging aspect is that concerns about household finances appear to be easing somewhat as a range of influences seem likely to support spending power in 2015. However, there is still a strong sense from a consumer perspective that the much vaunted economic recovery remains remote from their personal circumstances, emphasising the uneven and fragile nature of the upswing," said Mr Hughes.

“In a sense the “split personality” of sentiment index merely reflects the fact that while consumer spending accounts for about half of activity in the Irish economy, it contributed less than a tenth of the estimated growth in GDP in 2014,” he added.