Inflation rate rises for fourth consecutive month

THE annual rate of inflation crept up to 2.9% in November as consumer prices stayed largely flat during the month.

The headline rate — as measured by the latest Consumer Price Index (CPI) from the CSO — was up from an annualised measure of 2.8% in October, meaning that inflation has increased for four consecutive months. August was the last month to show a decline.

November saw a 2.1% increase in education costs, with clothing and footwear prices up 1.5%. There were declines in the prices of tobacco products, alcoholic beverages, and restaurants and hotels. Transport costs declined by 0.2%, with air fares falling in the month by 2.4% and petrol prices down by just over 0.5%. Although mortgage costs fell by 0.3%, they are still nearly 18% up on this time last year.

Experts, however, still anticipate a reversal of recent monthly inflation trends over the coming few quarters.

“The bulk of inflationary pressure continues to come from external sources, with the biggest contribution coming from energy prices and mortgage interest,” noted Goodbody Stockbrokers economist Juliet Tennent.

“In the meantime, domestic sectors continue to experience deflationary pressures, with the notable exceptions of education and insurance.

“The ECB rate decrease in November didn’t appear in the CPI data last month, but will subtract from inflation in December, and, given the latest ECB rates cut, also contribute to a further easing in the first quarter of 2012.”

According to Alan McQuaid, the chief economist at Bloxham Stockbrokers: “With employment growth not expected until well into next year and further fiscal consolidation weighing on disposable incomes, domestic inflationary pressures are likely to remain subdued for some time to come.

“Continued weak consumer demand will put downward pressure on prices, though the indirect tax changes announced in Budget 2012 will add to the CPI. Significantly higher energy prices, relative to the second half of 2010, will also likely exert upward pressure on the headline annual inflation rate in the short term, though the slowdown in the world economy should lead to downward pressure on global commodity prices.”

On the back of the figures, ISME has called for the Government to instruct the National Competitiveness Council to review costs to SMEs and to benchmark them internation-ally.

“This would make more sense than continuously imposing cost increases on business, without knowing the consequences on competitiveness,” the organisation’s chief, Mark Fielding said.

Meanwhile, the EU harmonised index was unchanged in November, showing a 1.7% annualised increase.