Consumer sentiment rose strongly for the third month in a row in December after a generous budget and easing oil prices today.
The IIB/ESRI consumer sentiment index rose to 98.2 in December from 94.0 in November, extending its recovery from September's sharp fall when the index hit a 21-month low of 80.5.
In December last year the index stood at 103.9 Austin Hughes, chief economist at IIB Bank, said the most positive element of the December survey had been people's outlook for the Irish economy in the coming year.
"The key driver seems to have been a very positive assessment of Brian Cowen's budget," he said of 2006 spending and tax plans announced by the finance minister in early December.
"It is significant that this outweighed the impact of the first ECB rate rise in more than five years and the gloom surrounding the Irish Ferries dispute".
The forward-looking element of the index, which measures people's expectations, rose to 95.6 in December from 88.3 in November. This more than offset a dip in the public's assessment of current economic conditions, which slipped to 102.2 from 102.4 in November.
Mr Hughes said there had been a slight weakening in the buying climate in December, suggesting consumers may have become slightly more hesitant about buying 'big ticket' items after the ECB's rate rise at the beginning of the month.
"However, the looming maturity of SSIAs will act as an important counterweight to higher interest rates. So household spending should be strong in 2006," he said.