Irish consumer sentiment rose to its highest level since January 2007 in September, as greater optimism in relation to Irish economic prospects and a related pick-up in the outlook for household finances in the coming year, pushed the index up.

The KBC Bank Ireland/ESRI Consumer Sentiment Index rose to 92.8 from 87.1 in August, as all the main components of the index recorded monthly gains.

According to the ESRI, the broadly based rise in sentiment in September may point towards a further step-up in confidence of late in response to signs of a strengthening recovery and the anticipation of an altogether less threatening Budget next week.

The most notable monthly gain was in relation to thegeneral outlook for the Irish economy, with consumers’ views on the economic outlook at their most positive since February 2006. However, there was a slight drop in the share of responses envisaging a further drop in unemployment in the year ahead (from 47% to 44%) but this may in part be a correction following a sharp rise in this share in the previous two months.

Austin Hughes, chief economist with KBC Bank Ireland, noted: "The jump in Irish consumer sentiment in September is at odds with weaker confidence readings across Europe last month".

Indeed Euro area consumer confidence posted a fourth consecutive monthly decline in September, pushing that measure to its weakest level since February, while in the UK, consumer confidence also weakened in September, the second drop in three months that has to be seen in the context of a strongly rising trend since the beginning of 2013.

As such, the improvement in the mood of Irish consumers in September most likely reflects domestic factors.

“It seems to reflect a range of good news on the Irish economy and, critically, growing expectations of a notably easier Budget,” says Hughes.