Irish consumer sentiment rose sharply in November as falling oil prices and hopes of a generous budget fed consumers' perceptions of an improving economy, according to the IIB/ESRI Consumer Sentiment index.
The survey based indicator jumped to 94 in November from 85 in October, the strongest reading since July.
IIB economist Austin Hughes
Petrol prices have slipped back towards €1 per litre during November, and earlier fears of prices sticking at above €1.30 have all but disappeared, according to IIB economist Austin Hughes.
"The improvement in sentiment is broadly based as consumers have become more optimistic regarding future prospects and current conditions," Mr Hughes said.
In addition, positive signals from the Department of Finance that next week's budget will be a generous one have bolstered consumer confidence.
IIB's analysis of the November figure also points to the removal of the groceries order as a signal to consumers that food prices will fall.
Mr Hughes forecast that if the historic relation between spending and sentiment still holds, consumer spending should be sustained at its current pace of around 7.5 per cent in the immediate run-up to Christmas.
However, over the longer term, consumer confidence remains fragile and much will depend on the looming seasonal battle between "Good Santa" in the form of Mr Cowen introducing a relatively generous budget next week and "Bad Santa" in the form of Jean Claude Trichet and the ECB, Mr Hughes said.
"While a rate hike - and the promise of more to come, will act to damage confidence, a carefully constructed budget package should be sufficient to keep Irish consumer sentiment and spending on an improving trend," Mr Hughes concluded.