CONSUMER SENTIMENT rose modestly in September as a drop in oil prices and a number of new job announcements combined to produce the first consecutive monthly increases in over a year.
The consumer sentiment index compiled by IIB Bank and the Economic and Social Research Institute (ESRI) increased from 43.4 in August to 45 last month.
But while it is an improvement, confidence remains very low when compared with the reading of 74.3 reported in September 2007.
The index, compiled from a survey of 900 people during the first two weeks of September, suggests that consumers remain extremely cautious, "but are still open to good news", according to Austin Hughes, chief economist at IIB.
However, he said the rise in confidence was still somewhat of a surprise given current economic conditions.
He attributed the increase in prospects for the Irish economy last month to three factors - moves by the US government to support the US financial system, including the nationalisation of Freddie Mac and Fannie Mae; the bringing forward of the budget to October 14th, and a number of new job announcements.
Another factor was the decline in oil prices, which dropped from $121 (€86) per barrel in August to around $101 in September.
"Not alone will this directly ease the squeeze on the spending power of Irish households, but the associated impact on inflation makes an ECB interest rate cut more likely, if still some distance away," Mr Hughes said.
He said the rise had an important caveat of coming from historically low levels. Consumer sentiment hit a record low in July.
He also noted a divergence in the historic and forward-looking assessments of household finance, with consumers more pessimistic in assessing the last 12 months and increasingly optimistic for the future.
Mr Hughes that suggested this could indicate a hope by consumers that the squeeze on spending power over recent years may finally be coming to a conclusion.
Another tentative outcome inferred from the data is that the dramatic weakening in confidence and consumer spending of late "owe a good deal to prudence, as well as to panic".
