Families bear brunt of inflation as clothes, shoes, and potato prices soar

Inflation has shot up much quicker than expected, according to the CSO, and hard-pressed consumers can expect to see their buying power decline further as the year draws to a close.

There was a sharp 0.6% rise in the Consumer Price Index in the month of August pushing up the annual rate to 2%.

Hard-pressed families look set to bear the brunt of the price increases with the cost of clothing and footwear increasing by 6.6% last month as the summer sales came to an end and an almost 10% increase in the cost of education.

The biggest single price increase was in the cost of potatoes.

Potatoes recorded a massive 17.1% increase in one month while coffee increased by 4.3% over August.

Chief economist with Davy stockbrokers, Conall MacCoille, does not see any relief for consumers in the medium term with inflation expected to eat into buying power.

“Stronger prices will squeeze consumers’ spending power heading into the final months of the year,” he said.

“CPI inflation is now likely to stay close to 2% in the remainder of 2012, pushing down on real incomes and posing a threat to consumer spending growth in the final quarter of the year,” he said.

One of the factors that has been keeping the overall measure of inflation down had been a decrease in the housing, water, electricity, gas and other fuels section.

This section was down mainly due to lower mortgage interest repayments, which were partially offset by an increase in the cost of home heating oil.

However, Mr MacCoille warned that energy prices were set to increase further during the last four months of the year and would push prices up even further.

Mr MacCoille said that the planned increases in the cost of electricity and natural gas, expected to be 5.9% and 8.5% respectively taking effect in October, will drive inflation up further and threatened consumer spending.

“With electricity and natural gas together accounting for 3.5% of the consumption basket, the mooted increases could push up the CPI by 0.2% by October. CPI inflation poses a threat to Irish consumer spending,” he said.

On an annual basis transport prices were up 1.3%. This increase in transport costs was driven mainly by higher airfares and higher petrol and diesel prices.

There was a fall in the cost of recreation and culture as the cost of recreational and sporting services, games, toys and hobbies and gardens, plants and flowers fell, but the price of a package holiday was up.

* Read more here