Inflation eases but education and transport costs rise

Inflation eased last month, from 2.2% in March to 1.9% in April, but a further drop in prices was offset by rising fuel costs according to the CSO consumer price index.

Consumer prices were largely unchanged in April, but on an annual basis certain sectors showed large increases, education costs increased by 9.4%, the cost of transport went up 5.7%, largely due to fuel prices, as well as miscellaneous goods and services up +4.1%.

Goodbody analyst Juliet Tennent said the Government’s deficit-reduction policy was driving inflation.

“Measures aimed at reducing the government deficit are having an upward effect on prices. These have been evident in the increase in tobacco prices, health insurance, transport fuel bills, and specifically this month the increase in the miscellaneous category which reflects the introduction of the household charge. However, sectors exposed to the Vat increase, like clothing and footwear and furnishings, household equipment and maintenance, are still experiencing price declines suggesting that retailers are unable to pass on the increase.”

The CSO highlighted the household charge and the rise in health insurance premiums as the factors driving up the cost of miscellaneous goods and services.

On a monthly basis, the cost of miscellaneous goods and services rose 1.3% while food and non-alcoholic beverages rose 0.5%. Over the same period there was a 0.9% fall in the cost of alcoholic beverages and tobacco and a 0.7% fall in transport prices. The monthly decline in transport costs was driven by a 15.1% fall in airline passenger costs.

The price of food and non-alcoholic beverages rose mainly due to higher prices for food commodities internationally. Off-licence sales drove down overall prices in the alcoholic beverages and tobacco index.

There was a fall in the cost of games, toys, and hobbies but a rise in the cost of package holidays.

Rents in the private sector declined by 0.9% between March and April but were up 2.4% over 12 months. Local authority rents were unchanged between March and April but are down 3.3% for the year.

Inflation in the services sector was 2.1% for the year to April, while the price of goods increased by 1.5%.

Services, excluding mortgage interest repayments, rose 2.7% since April last year for the year.

Ms Tennent said inflation was an obstacle to recovery, particularly as it ate into the public’s spending power.

“Irish consumers, already under pressure from higher taxes, high unemployment and tight credit conditions, are also seeing their real incomes being eroded by inflation which provides a further headwind for discretionary spending and the domestic economy.

“However, we expect some of the Governmentdriven domestic inflationary pressure to be offset by moderating energy prices in the coming months.”