Low levels of consumer confidence temper pricing and flatten inflation

LOW confidence levels led to tempered consumer prices and zero inflation during June, according to the Consumer Price Index for June, issued yesterday by the Central Statistics Office.

Consumer prices were down 0.1% for the month, though they were 2.7% higher than the same month in 2010. With inflation flat for June and at just 2.7% for the year to date, most analysts are predicting even more mute consumer trends for the remainder of 2011.

The European Union harmonised index of consumer prices decreased by 0.2% in the month, compared to a fall of 0.1% in June of last year. Prices on average were 1.1% higher last month compared with June 2010.

In domestic terms, utility bills have increased. Housing, water, electricity, gas and other fuels are all up 9.3%, miscellaneous goods and services are up 8.3%, communications is up 4.1% and health rose 4%.

In contrast, there was a fall of 4.3% in clothing and footwear and a 2.6% drop in furnishings, household equipment and routine household maintenance. This will mean even tighter times ahead for many retailers and service suppliers.

The Small Firms Association criticised the rises in public utility costs. Avine McNally said these hikes were putting pressure on business and consumer alike.

ISME was also critical of the price increases.

Chief executive Mark Fielding said Ireland needed to be more competitive in these utility areas.

Mr Fielding said: “Irish businesses have cut their controllable costs to the bone and are clawing back lost competitiveness but their efforts are being sabotaged by increased state costs, particularly in the areas of energy, waste, local charges and transport.”

Employer group IBEC predicts that inflation is set to moderate further in the second half of the year and there remains little or no price pressure in the domestic economy.

Chief economist, Fergal O’Brien, said: “Inflation is set to fall back further during the second half of the year and will probably finish the year at close to 2%, before falling further in 2012. Almost all of the inflation currently in the economy is due to rising mortgage interest rates and higher energy prices.

“We have seen little or no price increases in the core sectors of the domestic economy in the last year. Even in the case of food prices, where we have seen another global food commodity spike, this has not been passed on to Irish consumers. Food prices are up just 0.7% in the past year and have actually fallen by 0.7% in the past three months.

“Price adjustments have been essential to restoring Ireland’s competitiveness in the past three years and this process will continue. Price rises here are set to be well below those in our trading partners over the next year,” Mr O’Brien said.

There was a mild 0.6% seasonal rise in restaurant and hotel prices. The CPI excluding tobacco for June decreased by 0.1% in the month and was up by 2.8% in the year.

Excluding energy products, the CPI remained unchanged in the month and increased by 1.9% in the year. Excluding mortgage, CPI interest decreased by 0.2% in the month and rose by 1.6% in the year.