Consumer sentiment improved in January as the seasonal sales and better weather lifted the mood, a new survey showed today.

The overall KBC Ireland/ESRI index rose to 48.7 in January, from 44.4 in December.

The survey showed the underlying trend appears to be stabilising, although consumers remain cautious in their spending habits.

"Consumer sentiment improved in January, mainly due to an improvement in the perception of current conditions," said the ESRI's David Duffy.

"The improvement in consumers' perceptions of the current environment reflects the view that January was a good time to purchase major items. Historically this component has improved every January, reflecting, at least in part, the winter sales, followed by a more subdued figure in February."

KBC Ireland's Austin Hughes described the rise in the index as a "pleasant surprise".

"A little over half of this is due to the usual improvement in the buying climate as post-Christmas sales attract the bargain hunters," he said. "However, this element of the survey jumped less than in previous years. So, it suggests consumers remain fairly cautious."

The index of current economic conditions rose to 74.2 in January from 68.5 in December, while the expectations index increased to 31.5 from 28.1 in December.

Concerns still persist about employment, with more than 70 per cent of those surveyed saying they expect unemployment to increase over the next 12 months.

Two thirds of respondents believe their spending power would weaken in the year ahead, while a similar amount expect the economy will worsen in 2011.