Consumer confidence hit a six-year high this month, propelled by positive news in the jobs and property markets.

However, Irish households remain risk-averse, with data showing that borrowing continues to fall as consumers use available funds to repay debt.

The KBC Bank Ireland/ESRI consumer sentiment index rose to 73.1 in September from 66.8 in August, reaching its highest level since 2007. The index of current economic conditions also improved to 86.0 in September from 83.3 in August, the fifth consecutive monthly increase.

The index also found that positive views on the economic outlook exceeded negative views for the first time since February 2006.

“September’s survey reveals growing confidence amongst consumers, with improvements compared to September last year and August this year,” said Kevin Timoney of the ESRI.

KBC economist Austin Hughes said the size of the rise in consumer sentiment in September was surprising, but broadly consistent with a gradually improving trend in confidence of late. However, he warned that the improvement reflected an element of "catch-up" in sentiment as opposed to any dramatic change in the economic environment.

Borrow less
Indeed, despite the boost in sentiment, data from the Central Bank shows that Irish households continue to borrow less, with lending down 4.3 per cent in the year to August 2013.

And, despite a mooted recovery in the housing market, mortgage lending continues to slide, falling by 2.3 per cent.

In August, Irish households repaid more than they borrowed to the tune of €411 million, a development due mainly to the €234 million decrease in mortgages.

Alan McQuaid, economist with Merrion Stockbrokers, said the figures showed little progress in terms of advancing loans to households.

“As a result this will severely hamper the overall recovery prospects for the housing market and the Irish economy as a whole, and keep the unemployment rate higher than it would otherwise be.”

Lending to Irish businesses also fell during the period under review, down by 4.4 per cent, following a decrease of 4.8 per cent in July.

And while households are borrowing less, this does not correspond to an increase in saving. According to the Central Bank, household deposits fell by 0.4 per cent in the 12 months to August.

International markets
Meanwhile, additional data from the Central Bank shows that Irish banks continue to retrench from international markets. In the second quarter of 2013, foreign claims fell by 6 per cent to almost €100 billion.

“The annual reduction in total foreign claims is expected given that the domestic banking groups continue to downsize their operations abroad,” according to the Central Bank.