Real drivers of inflation offer food for thought
Not alone are the Irish spending at home, they are also flocking to Paris, Dubai, New York and London to splash their money about.
For years the Irish might have been reluctant consumers, due to a fundamental lack of resources, but they have grasped the nettle of consumerism with wild abandon in recent years.
Irish society is now every bit as consumer driven as the US ever has been or is ever likely to be.
The good news for retailers in Ireland, Dubai, New York, Paris and London is that Christmas 2006 is now looking like the best in the history of the Irish state.
Against a background of ongoing job loss announcements, the significant increase in the general cost of living, and rising interest rates, this wild consumer spending might seem a little misplaced.
However, consumer spirits are being driven by maturing SSIA monies, reasonable growth in wages for many people, and the most generous and profligate budget in the history of the state. And it is of course being facilitated by the ready availability of credit.
The fact that Irish consumers are borrowing and spending with such abandon seems to reflect extreme confidence in the future.
It is only right that 2006 should end like this, because at the beginning of the year we were being promised by Enterprise Minister Micheál Martin and many other so-called advocates of the consumer, that 2006 would be the year of the consumer.
These promises were being made in the context of the abolition of the notorious Groceries Order.
At this juncture we should be asking if the abolition of the order has actually resulted in the windfall we were promised. I don’t think so.
Food prices have increased by 2% over the past year, with the items previously covered by the Groceries Order only falling slightly in recent months, and the other items actually increasing slightly.
Any rational individual should agree that it will never lead to the sort of consumer nirvana many have been promising.
The reality is that food price inflation is still running at significantly lower levels than overall inflation, and this has been the case for the past decade, not that one would have gleaned this from popular discourse.
Over the past year alone, the cost of the average mortgage has gone up by 48.8%, natural gas prices have gone up by 33.8%, the cost of dental services has gone up by 6.6%, doctors’ fees have gone up by 7%, taxi fares have gone up by 12.4%, postal services have gone up by 6.7%, and the cost of primary education has gone up by 9.2%.
Lots of inflation there, but we are still hearing rubbish about Irish food prices. It is high time that our policy makers, particularly the Competition Authority, and consumer advocates started to focus on the real drivers of inflation rather than picking on easy targets with little political clout.
Meanwhile, the rampant Irish consumer will continue to complain about the rising cost of living, but in the last couple of days before Christmas and again before the turkey has cooled down, they will continue to tramp the streets and spend money in a very vibrant retail sector that is becoming depressingly uniform, in terms of the products being sold and the type of stores they are being sold in.
God be with the days when the Irish shopping experience had some element of uniqueness but the only difference the Irish shoppers in New York and London are likely to notice this Christmas is the price of what they are buying, rather than the variety of goods on offer.
