Consumer sentiment strengthened considerably in December, according to the IIB Bank/ESRI index, published yesterday.

Sentiment rose to 103.9 from a November figure of 92.6.

The main driver of the improved sentiment was a more positive view as to future prospects.

Consumers were found to be more positive regarding the labour market, the economy and their household financial situation. The recent budget from the Minister for Finance, Mr Cowen, also added to the positive sentiment.

Mr Austin Hughes, chief economist with IIB, said the sharp rise in sentiment was partly a correction after the surprise fall in November.

"We think a positive assessment of Mr Cowen's recent budget package was also a driver of the improvement in consumer sentiment last month. It is notable that the strongest gains were seen in aspects of the survey connected with the economy as a whole rather than consumers' own personal financial situation," he said.

Mr Hughes said the surge in confidence in December could be seen as approval for a socially inclusive budget. "We think that it is more likely that consumers were pleased that there were no unpleasant surprises in the budget day announcements.

"On the evidence of the previous surveys, it also seems to be the case that consumers recognise that sensible budget policies imply a brighter economic outlook, whereas giveaways will always have to be paid for in the future."

The forward-looking sub-index, the expectations index, rose to 104.7 in December, from 87.9 in November. The index of current economic conditions rose modestly to 102.6 in December from 99.6 in November.

The December consumer sentiment index figure brings consumer sentiment back into line with its nine-year average but still remains way below the 120 average during the Celtic Tiger period.

The most striking influence on the improvement in sentiment, according to the index, was the outlook for employment where, for the first time since February 2001, positive responses exceeded negative responses.