CONSUMERS are feeling their most optimistic in six years, with householders less fearful about the future of the economy.
However, it is feared that sentiment could dip next month as people digest the cuts announced in the Budget.
A study by KBC Bank Ireland and the Economic and Social Research Institute (ESRI) shows the mood among consumers improved modestly in October following a sharp rise in September.
The bulk of the survey was carried out before the Budget was delivered on October 15.
"The general economic backdrop remains one in which fears are easing gradually rather than one in which a palpable feel-good factor is building," the study said.
"As a result, it wouldn't be too surprising if there was some retracement of recent gains in next month's survey.
"However, if the improved buying climate withstands the Budget and is evident again in the November survey, it might signal some welcome improvement in household spending in the months ahead."
The KBC Bank Ireland/ESRI Consumer Sentiment Index improved to 76.2 in October from 73.1 in September – the strongest since June 2007.
While the findings are positive, they still suggest consumers are remaining cautious.
Just over half of those surveyed indicated that their financial situation had worsened through the past year, nearly five times as many as those who reported improvement.
But despite the study being conducted in the weeks before the Budget, there was a significant improvement reported in the buying climate.
"Since the turn of the year there have been six monthly increases and four monthly declines in the sentiment index," the study's authors said.
"This volatility suggests consumers are having significant difficulty in making sense of a still very uncertain economic landscape."
The rise in sentiment here last month was stronger than the marginal improvement in confidence reported within Europe and the US, the study said.
The mood of consumers in America dipped last month with concerns about the consequences of the federal government shutdown and difficulties in resolvi ng debt ceiling issues making people more nervous.
UK data also showed some small retracement after hitting a six-year high in September.
"Of course, these results still suggest a majority of consumers don't expect the Irish economy to improve in the next 12 months," the study said.
"This highlights the entirely understandable caution that informs consumer thinking.
"If there is no sense of euphoria in this data, there are clear signs that consumers feel the Irish economy is set to move on to a healthier growth path in the coming year."