Cautious optimism pushes Irish consumer sentiment higher

DUBLIN (Reuters) - Irish consumer sentiment bounced back in February thanks to cautious optimism about the outlook for the economy, despite the prospect of COVID-19 restrictions lasting for many more months, a survey found on Tuesday.

Ireland has been back in lockdown for almost two months and the government has said any reopening will be very gradual, with the hospitality sector likely to remain shut until mid-summer as the more infectious UK COVID-19 variant slows suppression.

The KBC Bank consumer sentiment index rose to 70.8 from 64.9 in January. That compares with the 2020 average of 65 and a pandemic low of 42.6 registered during the worst of the first wave of infections in April

"The survey period saw a number of very positive forecasts for the Irish economy which hint that the lasting economic and financial fallout may be less problematic than initially envisaged," KBC Ireland chief economist Austin Hughes said.

"In a similar vein, recent data showing resilience in property prices and a sharp pick-up in new building and house purchases of late may have provided some comfort that this crisis was not following a familiar and frightening playbook."

However Hughes noted that in additional questions posed in the February survey, 51% said the pandemic had negatively hit their financial circumstances and 30% of all respondents thought the negative impacts would last for one to two years.

He said those results might caution against expectations of an unprecedented consumer boom later in 2021 as record savings were unwound and were "a forceful argument" in favour of the persistence of supportive fiscal policy.

"These responses hint that for the Irish economy the problem of permanent 'scarring' from the crisis seems set to be a more important issue than the possibility of pent-up demand boosting spending," he said.

(Reporting by Padraic Halpin; Editing by Alison Williams)