Annual inflation increases marginally

ANNUAL inflation rose just marginally from 2.1% in March to 2.2% at the end of April, the latest Central Statistics Office (CSO) figures reveal.

Cost increases measured by the Consumer Price Index (CPI) rose by 0.5% in the month compared to an increase of 0.4% in April 2004 pushing up the annual rate of inflation slightly.

The bare figures, however, conceal the fact that domestic inflation is still stubbornly high. While the annual rate of inflation for goods was 0.7% in April, the corresponding rate of services price hikes was much higher at 3.7%.

During April prices for home heating oil, electricity and mortgage interest repayments were higher, while transport costs rose by 2% driven by dearer petrol and diesel.

Hotels charged more. The cost of eating out also rose.

Falling house and motor insurance costs helped keep service inflation in check to some extent, said the CSO.

Eugene Kiernan, head of asset allocation at Irish Life Investment Managers noted the sharp difference between goods inflation and prices in the services sector where consumers are faced daily with rising prices.

In effect the Irish economy is undergoing a twin track inflation experience with goods inflation almost absent while services inflation rose by just under 4%.

Overall inflation rate remains reasonable at 2.2%.

The best areas for shoppers remain in food and clothing where prices are down on the year. Significant price competition in the area of cameras and computers saw prices 10% lower than 12 months ago. Services remain under pressure, he said. “The cost of running a home continues to escalate. Housing, water and electricity costs are up over 10% on the year.”

Last month this number was just over 9%. Electricity costs are over 13% higher than 12 months ago. Water and refuse charges are up 36% year on year, he said.

Employer body, ISME, slammed the figures.

It said the headline rate covered up the “dramatic cost increases to small business”, particularly for electricity and local charges.

ISME, which represents small business said the bottom line was inflation in its current guise poses a threat to business that must be confronted.