McCreevy welcomes slight dip in inflation

POLITICIANS' views clashed yesterday in response to the slight dip in the annual inflation rate.

Finance Minister Charlie McCreevy welcomed the latest figures showing a fall in the annual cost of living from 4.7% in May to 4.4% in June. But Fine Gael finance spokesman, Richard Bruton, countered that inflation remains "doggedly high."

Inflation measured by the Consumer Price Index rose 0.2%, well below the 0.5% growth in June last year. Mr McCreevy agreed the overall trend was still very high and he accepted that the annual figure for 2002 would now be 2.5% and not the 4.25% target in his Budget. Speaking after an Ecofin meeting in Brussels, he said figures masked domestic inflation in the services sector.

The minister said he hoped measures in the competition area would bring prices down, but he accepted that the 4.25% Budget inflation target for the year would be revised upwards to 4.5%. At 4.4% in June, the CPI is the lowest figure so far this year. Consumer prices rose by 0.2% in the month.

The EU harmonised index of consumer prices rose by 0.2% in the month and 4.5% on an annual basis. The main factors in the improvement were an easing in the rate of growth in food and non-alcoholic drink prices, and a continuing decline in oil prices, that led to a decline in the cost of fuel.

Bloxham economist Alan McQuaid is still forecasting an average annual rate of 4.7% for this year, arguing the figures continue to show inflation running at a much higher rate than desirable. He failed to see how the rate could fall below 4% in the near future, but added that a stronger euro should benefit Ireland.

Separate CSO figures showed that the seasonally adjusted volume of industrial production for the three months to the end of May was 4.9% up on that for the previous three month period. The year-on-year increase for May 2002 was 16.5%.

The latest inflation figures show why Ireland is ranked among the most expensive countries in Europe. An earlier Forfás report showed the cost of living here is the second highest in the eurozone. That study was undertaken by the state agency Forfás, and it was commissioned by the Government to measure the cost of living in Ireland after the euro changeover.

Last month, several areas were hit by higher prices including housing, water, electricity, gas and other fuels, which were calculated to have risen by 0.8% in June. Food and non-alcohol drinks saw prices rise by 0.3%, while recreation and cultural pursuits such as going to the theatre etc, increased by 0.3%.

Eating out, which has become part of our way of life, rose by 0.3%. IBEC, the main employer body, welcomed the slowdown in prices. Chief economist David Croughan said the very modest 0.2% increase "was a welcome reduction in the rate of inflation which had been rising by an average of 0.7% per month in the previous four months."