Inflation falls but charges increase

Brian O’Mahony, Chief Business Correspondent

Figures from the Central Statistics Office show that annual inflation fell overall from 2.4% in May to 2.1% in June, but the figure masks steep rises in the sheltered sectors of the economy.

Fine Gael’s spokesman on finance, Richard Bruton, said charges emanating from Government were rising six times faster than in the rest of the economy.

The June figure concealed “some serious problems beneath the surface”, with inflation in the health sector running at three times the euro zone average (6.3% versus 2.2%), Mr Bruton warned.

Inflation in housing, water, electricity and gas is running at more than twice the rate of the euro zone (9.5% versus 4.3%).

Costs in education in Ireland is also almost double the euro trend (6.6% versus 3.4%).

As a result, Irish prices are starting to move ahead of our European counterparts, Mr Bruton said.

Economists were more positive on the figure overall.

Bloxham Stockbrokers , chief economist Alan McQuaid saw the numbers as positive in the overall context of a strong economy.

“While there may be a slight up-tick in the second half due to a lower euro against the dollar and stubbornly high oil prices, I still think the outlook for the year is very positive, with the headline rate coming in somewhere between 2.25 and 2.5% with the harmonised Index somewhere between 2.0 and 2.25%, he said.

Friends First chief economist Jim Power said the trend witnessed in June had been emerging for some time.

Healthy competition overall is keeping prices down, while Mr Power also highlighted the role played by the state in keeping prices higher than otherwise might be the case.

“It is clear that on the goods side, competitive forces are playing a very important role in keeping prices down.

“With the services side of the economy, the state continues to make an important contribution to inflation with health running at 6.4% year-on-year and education at 6.6%.”

Oil prices contributed to the month’s price increases and without oil the headline rate of inflation would be under 1.5%.