Inflation hits 2.8% as utility and education costs soar

CONSUMER prices rose by 0.3% last month, pushing the annual rate of inflation up to 2.8% in October.

Significant rises in the cost of education and everyday utility services meant that the inflation rate rose for the third consecutive month — and higher than expected from the 2.6% measured in September — according to latest monthly data published yesterday by the Central Statistics Office (CSO).

A hike in third-level study fees bumped up education costs by 7.5% last month and 6.5% year on year; while housing, water, electricity and basic fuel costs rose by 1.7% and 10.2% year on year. There was also a further hike in mortgage interest costs — up 0.6% and by 18% in the past year.

However, commentators are not anticipating ongoing inflation increases. It was noted, yesterday, the majority of inflationary pressure here is continuing to come from external sources, with most domestic sectors continuing to experience deflationary pressures.

A further slowdown in the global economy, coupled with a continuing drop in domestic demand, is likely to result in an easing in inflation over the coming quarters, according to Juliet Tennent, economist with Goodbody Stockbrokers.

“A slowdown in the global economy, exacerbated by the financial turbulence in the euro area, will ease some of the external inflationary pressures. In addition, domestically driven price increases will remain subdued as Irish consumers are unlikely to increase discretionary spending any time soon, in the face of continued weakness in the labour market and another four years of austerity measures,” she added.

Alan McQuaid, chief economist with Bloxham Stockbrokers, said that as well as higher commodity prices, increased mortgage costs have been the main driver of headline inflation this year. Further monetary easing from the European Central Bank over the next few months, however, should help to keep the headline inflation rate down, Mr McQuaid added.

“The median projection in the latest Reuters monthly poll of Irish economists put consumer prices averaging 2.6% this year and 1.7% in 2012, and based on these latest figures we wouldn’t disagree too much with those forecasts,” he said.

The EU Harmonised Index of Consumer Prices (HICP) also increased by 0.3% in October, bringing the annual inflation rate to 1.5% in the region.