Annual inflation rate climbs to 1.7%

Ireland’s inflation rate for June was 1.7% higher than Jun 2011, but 0.1% lower than in May 2012 and 0.2% lower than in April of this year. On a monthly basis prices were down 0.2%, according to figures released by the CSO.

Fri, 13 Jul, 2012 - 01:00

John Walsh

The annual rate of inflation for services was 2.2% for the 12 months to June. Stripping out mortgage costs, the rate of inflation for services was 3.1% for the year. The cost of goods rose 1% over the year.

Over the past 12 months one of the biggest changes was a 9.4% increase in the costs of education, caused by a hike in third-level fees.

There was a 5.7% increase in transport costs on the back of higher petrol and diesel prices and an increase in airfares. Alcohol and tobacco was up 4.3% after an increase in tobacco prices, and miscellaneous goods and services were up 4.3%.

Over the past year, the cost of furnishings, household equipment, and routine household maintenance was down 2.5%, mostly on the back of furniture and fittings sales. The cost of communications was down 1.2% and recreation and culture was down 1.6%.

Merrion Stockbrokers’ economist Alan McQuaid said: “Following the deflationary pattern of 2009 and 2010, Ireland returned back to an inflationary environment in 2011, though mainly it has to be said driven by external forces.

“The average headline inflation rate last year was 2.6% compared with average falls of 1% and 4.5% in 2010 and 2009 ... Domestic inflationary pressures are likely to remain subdued for some time to come. Continued weak consumer demand will put downward pressure on prices in the coming months as will lower interest rates, though the indirect tax changes announced in Budget 2012 will add to the [consumer price index].

“On the external front, the main risk remains global energy prices... we believe the average inflation rate will be lower this year than in 2011. Clearly a lot depends on how severe the global economic downturn is, but as things currently stand we think Ireland’s headline inflation rate will be around 2%.”