Food and clothes push inflation to 4.8%

HIKES in the cost of food and clothing pushed Ireland’s rate of inflation to 4.8% last month from 4.3% in January.

According to the CSO the most significant monthly price changes were 12.7% increases in clothing and footwear, a 2.8% hike in furnishings and household equipment, and a 1.8% increase in food and non-alcoholic beverages prices.

In February alone the pint of milk was up 7.6%, cheese 3%, beef 3.5%, poultry 3%, bread 2% and breakfast cereals 4.3%.

Flour is also up 46%, milk 29%, bread 23% and eggs 20%.

Chief economist with Ulster Bank, Pat McArdle said there is probably more to come.

“The annual rate of increase in food and non-alcoholic beverages was 8.5%, the highest since June 1984,” he said.

He added that one of the few positives last month was provided by petrol and diesel prices, which fell by 2% to 3%, reflecting the state of play in early February.

Ireland’s rate of inflation, however, remains stubbornly high, according to chief economist with National Irish Bank, Dr Ronnie O’Toole.

“It was expected that inflation would gradually reduce over the course of 2008 as the economy slowed and economic bottlenecks eased.

“However, the outlook now is that inflation will be significantly higher than expected.

“This is untimely for the government given that the partnership pay talks are about to kick off.

“The unions have been arguing for wage increases well in excess of inflation to ensure that the purchasing power of wages is enhanced.

“However, the competitiveness consequences of high wage rises in the current economic climate are potentially very serious for exporters, particularly to the UK and the US given the strength of the euro,” he said.

Alan McQuaid of Bloxhams Stockbrokers added that with Irish headline inflation back on the rise again, and set to increase further in the short-term, pay talks among the social partners will become that bit more difficult.

“However, it is important that excessive wage increases are not sanctioned if Ireland is to remain competitive going forward,” Mr McQuaid said.

Mr McQuaid added that with headline inflation averaging 4.9% in 2007, it would be no great surprise now if the average was above 4% again this year.

Groups representing businesses said the hike in the rate of inflation is a “huge concern to small businesses”.

Chief executive of ISME, Mark Fielding said: “The latest figures confirm that the threat of inflation to Irish business is still very much to the fore and that recent reductions represented a false dawn.”