Consumer sentiment rose fractionally in February, the fourth improvement in the Credit Union Consumer Sentiment Index in the past five months.

The Index rose to 55.6 in February from 55.2 in January and compares with a reading of 77.0 just before Russia’s attack on Ukraine.

The February result is the strongest since June 2022.

The increase in Irish consumer sentiment in February mirrored gains in similar confidence measures for the US and the EU.

Economist Austin Hughes said Ireland may have moved past ‘peak fear’ in relation to consumers' concerns around cost-of-living pressures and the threat of markedly weaker economic conditions.

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“However the February reading also suggests that while concerns may be easing there is absolutely no sense that they have ended,” he added.

“The sentiment survey clearly signals that consumers remain cautious and constrained in their spending power. A significant fear factor remains a key influence on consumer sentiment.”

Consumer thinking on the 12-month economic outlook weakened slightly in February. Hughes notes that with continuing nervousness around the multinational sector and major difficulties in the housing market, it may be that consumers continue to feel cautious about macro prospects.

Sentiment in relation to jobs improved for the third month in a row in February. Concerns that emerged through the autumn on tech sector layoff announcements have eased considerably, according to Hughes.

The most notable improvement between January and February sentiment readings was seen in consumers' assessment of the change in their household financial circumstances through the past 12 months.

Hughes believes the drain on household purchasing power from higher inflation in 2022 was around €3,500.

“Our sense is that the key driver of the more positive reading in this element of the sentiment survey is that most consumers had braced themselves for even more severe cost-living pressures in early 2023.

“In these circumstances, the easing in pump prices and wholesale energy costs more generally encouraged the view that the worst may be over in this regard, but mild weather likely also played an influential role by limiting heating usage,” said Hughes.

“The sense that sentiment has been boosted by a sense that that the conditions consumers are facing are not as bad as feared rather than materially improved is consistent with altogether more cautious readings in the February survey in regard to households expectations for their spending power over the next 12 months.”