Inflation rise to 5.1% ‘unacceptable’

IRELAND’S inflation rate at 5.1% is unacceptably high and damaging competitiveness, according to some of the country’s leading economists and business groups.

The latest consumer price index (CPI) shows the headline inflation rate standing at 5.1% in April, the same as in March. Headline prices were up 0.8% in the month in April, the same increase as in April last year.

The inflation figure compares with 4.8% in February, and a six-year high of 5.2% in January.

Higher mortgage costs were one of the main drivers of inflation last month, as were food, drink and transport costs.

It is estimated that the cost of mortgages rose by 6% on the month, adding 0.4 percentage points to the index.

Economist with Bloxhams Stockbrokers, Alan McQuaid said Ireland’s headline inflation remains higher than desirable and is putting pressure on the competitiveness of the economy.

“While the economy was in a very favourable competitiveness position, which was probably unsustainable, at the beginning of the current decade, the extent of the deterioration since then is a matter of concern.

“Price competitiveness has deteriorated further over the past 12 months or so with an increase in consumer price inflation.”

Mr McQuaid expects the headline inflation rate to average around 4.5% this year, as does Dan McLaughlin, chief economist with Bank of Ireland.

Mr McLaughlin said: “By year-end inflation may well have fallen to under 3.5% however, so opening up the prospect of a sub-3% average in 2008 in the absence of another spike in oil prices.”

IBEC senior economist Fergal O’Brien said: “The main drivers of inflation remain external to the Irish economy, in the form of rising ECB interest rates and a recent spike in world oil prices.”

Mr O’Brien added that there was some positive news for consumers in the fact that inflation in some sectors such as health and other services had eased in recent months.

Meanwhile, the Irish Small and Medium Enterprise association (ISME) has called on all political parties to immediately publish their specific proposals to address the inflation crisis in the lead up to the election.

ISME chief executive, Mark Fielding said: “It is quite obvious that there is no current plan in place to address a situation that has been out of control for a number of months, with the consequential impact of higher costs undermining business competitiveness.”