Insurance costs continue to spiral

INSURANCE costs continued to spiral last month with home and motor premiums increasing as the cost of living jumped 0.7% in the year.

Although the annual rate of inflation rose to 0.7% in October from 0.5% in September, month-on-month prices were flat, according to the figures released by the CSO.

The main factors that contributed to the monthly change in the October consumer price index were increases in house and motor insurance, electricity and the cost of prescribed drugs.

The cost of clothing and footwear fell due to winter sales and third-level tuition fees also dropped.

In the last 12 months mortgage interest has shown 24.7% inflation while health costs also rose, primarily due to an increase in the price of prescribed drugs.

Insurance costs rose 0.7% last month and are up 7.5% in the year. Home insurance prices jumped 1.7% last month and are up 14.5% in the year. Also increasing were motor insurance costs, which rose 1.2% last month — up 0.7% in the year.

Bloxham chief economist Alan McQuaid said the main upward inflationary pressure in the coming months will come from mortgage interest rates, food and energy costs. “We are now expecting headline prices to be down 0.9% on average in 2010 as against a fall of 4.5% in 2009, and up 1.0% on average in 2011,” he said.

Davy Stockbrokers said upside price pressure going forward may also stem largely from international factors such as food and commodity prices and from regulated sectors such as education.

Ulster Bank economist Lynsey Clemenger said price rises last month were offset by a 3.5% drop in hotel room rates, declines in car prices, petrol, diesel, as well as in clothing, footwear and third-level fees.

In the food sector, big price changes were seen in poultry (-10.5%), potatoes (-11.3%), cocoa (19.3%) and flour (14.7%). Alcohol was down almost 8%, while clothes are down 6.7%.

Rent costs, down almost 3% in the year, were flat last month. Rail and bus prices are up slightly but air fares soared by more than 20%.

Small business group, ISME said it is “absolute nonsense” for the Government to be “cheerleading the drive in exports, while at the same time increasing costs on business which only makes it more expensive to trade out of Ireland”.