IRISH CONSUMER sentiment has improved following a sharp drop in December prompted by ongoing uncertainty over the stability of the euro and in the wake of Budget 2012.

The latest KBC Bank Ireland/ESRI Consumer Sentiment Index rose from December’s 49.2 to 56.6 this month, pulling back two-thirds of the drop the index experienced between November and December when it fell 10.9 points. However, it said that the recovery should be treated as “modest and tentative”.

January’s data shows that while consumers retain a bleak outlook on the economy, the heightened concerns which prompted December’s dip in sentiment have apparently eased. KBC economists say that the Christmas respite in media coverage of economic issues may have helped those concerns to ease somewhat.

Consumer confidence also increased in the US and UK this month as fears over the eurozone and wider global economy eased somewhat in the new year.

Irish consumers also appear to be braced for another difficult year ahead, although about five times more people surveyed in January for the index said they expected their finances to worsen than improve, while two-thirds said they believe the Irish economy will weaken in 2012.

Both results were more positive than in December’s index, but KBC economist Austin Hughes said that the January results don’t dramatically alter the overall position:

The improvement in the sentiment survey in January doesn’t alter the picture of an Irish consumer who is nervous and cash constrained but it does suggest the intense fears seen in the December reading have eased somewhat of late.

The threat of an imminent Euro break-up has faded and Irish consumers may also be a little less frightened about the impact of Budget 2012 on their household spending power.

KBC says that it has seen greater volatility in consumer sentiment levels in recent months than usual, which likely reflects what has been a particularly uncertain economic environment.

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