Consumer sentiment rallied strongly in November, posting its highest monthly increase on record.

The IIB/ESRI consumer sentiment index climbed for the fourth month running to 78.2 - its highest since July 2002. The rise suggested a significant easing in pessimism about the economy and the jobs market, said Mr Austin Hughes, IIB chief economist. Four months of rising confidence boded well for the economy, he said.

A slump in confidence in early 2000 was a harbinger for the emerging slowdown.

The return of optimism is born out by an improvement in the expectations sub-index, to 72.6 in November from 58.1 in October.

The rise in the index of current economic conditions was more marginal, at 86.6 in November from 86.2 in October.

However, hope of an upturn is qualified; 46 per cent of consumers still expect conditions to worsen, while nearly 62 per cent believe unemployment will rise.

The number of people who felt now was not a good time to make purchases climbed to 26 per cent from 20 per cent.

"It is interesting that sentiment towards the general economic outlook improved dramatically while consumers expected only marginal gains in their own financial situation," according to Mr Hughes.

"That may imply they reckon a fairly tight Budget will be positive for the Irish economy although it won't enhance their spending power in the near term."

Meanwhile, Dublin City Business Association has predicted €2 billion will be spent in the State's capital in the run-up to Christmas.

Some 700,000 will visit the city each day as anxieties over the economy's prospects diminish, said the association's chief executive, Mr Tom Coffey.