Households face jump in inflation rate
The latest consumer price index published yesterday by the CSO detailed a 1.2% year-on-year rise in October, following on from annualised increases of 1.6% in September and 2% in August.
October’s prices decreased by 0.1% on a month-by-month basis, but transport, clothing/footwear, energy and education costs showed notable increases, while energy and education represented the main annualised rises.
“In all, while October’s decline in the rate of inflation was good news for households, our sense is that this respite is unlikely to endure given announced hikes in transport and mortgage interest costs, which will put upward pressure on the inflation rate over the coming months,” said NCB Stockbrokers’ chief economist Philip O’Sullivan.
“Energy prices will put upward pressure on the index. Increases in electricity and natural gas prices were due in October. However, energy prices increased by just 0.1% on the month and 1.2% on the year in October. So, the full effects of the planned price increases have yet to appear in the index,” said David McNamara, of Davy Stockbrokers, who expects overall inflation of 1.9% for 2012 before an easing to 1.2% next year.
Energy remains the biggest contributor to the overall inflation rate, with household energy bills increasing by 9% annually. Energy product prices were up by 0.7%, on a monthly basis, in October, but rose by 10.4% in the month on a year-on-year basis. Housing costs (including water, electricity, gas and other fuels) rose by 1.2% on a monthly basis, but were down by over 3% annually.
According to Goodbody Stockbrokers’ economist Juliet Tennent, domestic price pressures remain subdued, aside from areas exposed to reduced Government spending. “Weakness in the labour market and the lack of credit will continue to act as a headwind to discretionary consumer spending,” she said.
That said, Davy Stockbrokers is forecasting a significant easing in the decline in consumer spending over the next 12 months, with 2012’s anticipated -1.9% level easing to a -0.5% level next year.
