Mortgage interest, airfares and petrol prices soar

MORTGAGE interest payments, air fares and petrol prices all soared in the last year as prices nudged up 0.5%.

According to the latest inflation figures, although the cost of living was down by 0.1% on a monthly basis last month, prices are up 0.5% in the year to the end of September.

August saw the first annual increase in inflation since December 2008.

In the year, mortgage interest was up 25.1%, petrol was up almost 12% and air fares were up 16.1%. Dental services also jumped by close to 9%.

However, food prices were down 2.2%, alcohol was down 8.7% and clothes prices fell 7.2%. Childcare costs plunged 11.2% in the year.

On a monthly basis the main factors contributing to the change in the September consumer price index were decreases in airfares and medical insurance.

Clothing and footwear prices were 4.5% higher in the month following the end of the traditional summer sales.

The increase was possibly also due to cotton prices, which have climbed steadily since reaching a low in April 2009, according to analysts.

Alan McQuaid of Bloxham Stockbrokers said with month-on-month prices down 0.1%, deflationary trends are still fairly evident on the ground.

A European measure of inflation which excludes mortgage interest relief shows Ireland remains one of two countries within the 27-member bloc, along with Latvia to still be in deflationary territory.

“This should be no surprise given that they were the two countries within the EU to implement severe wage/price reductions across the board,” said Mr McQuaid.

Bloxham expects headline prices to be down 0.9% on average in 2010, against a fall of 4.5% in 2009 and a rise of 1% forecast for 2011.

Director of the Small Firms Association Avine McNally said the September inflation figures show inflation is being driven by increases in public utility costs, such as housing, water, electricity and gas.

“The figures show that costs in some sectors are too high and need to come in line with our competitors.

Cost competitiveness remains a major challenge for small firms and it is critical for their survival that these costs are brought under control,” she said.

Small business group ISME said unless key cost areas, including transport, waste, energy and local charges are addressed, companies would be forced to close.

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