Consumer prices fell slightly last month as some of the huge benefits of the surge in the euro against sterling, this year may have been passed onto consumers.
The euro has climbed over 14% against sterling, since the shock UK vote to quit the EU, in June.
It has soared by 20% since the start of the year. Such an enormous rise for a major currency, in less than 11 months, is unprecedented, and the prices of goods for consumers in the Republic should fall sharply.
A large chunk of the household budget here is spent on food, and other domestic goods, which wholesalers, retailers, and suppliers source from across the Irish Sea, and which are priced in sterling.
The CSO figures published yesterday show prices fell for the fourth successive month, by 0.5%, and were driven lower by sterling’s weakness against the euro, said Conall Mac Coille, chief economist at Davy Stockbrokers.
Consumer prices have fallen by 0.3% since October, 2015, and Ireland’s inflation rate is close to the weakest in the eurozone, which “should help Irish consumer spending in 2017,” Mr Mac Coille said.
Food prices in the last three months fell 0.8%, with items such as flour and eggs dropping by 6.5% and 10%, respectively. In the year, prices of clothing and footwear have fallen 2.5% and 2.7%, respectively.
The prices of furniture, carpets, and floor coverings have dropped sharply, by 7.2%, since October, 2015, while car prices have fallen 3.8%.
Lynn Drumgoole, a spokeswoman for industry group Retail Excellence, said that many retailers would have bought merchandise at a much earlier time, before the euro had surged against sterling. Retail sales in some sectors have fallen in the last quarter, she said.
Meanwhile, the standout price increases are again in the services economy.
Private rents continued to climb, by 0.9% in the month.
Rents, which are now 10% more expensive than October last year, have surged 45% since the depth of the financial crisis, in late 2011.
However, there was a large drop of 8% in the month in the cost of insuring a car. Insurance premiums are still up 8.6% in the last 12 months, and are 48% more expensive than they were in late 2011.
“It is now almost a year since the Irish Government introduced two-year rent review periods,” said Davy’s Mr Mac Coille.
“However, the CPI [consumer price index] capturing new rents shows no sign of slowing down. Indeed, the annual growth in rents, at 10.1% in October, is the fastest pace since November, 2015,” he said.
Alan McQuaid, chief economist at Merrion Capital, said that oil prices will be “critical in determining the headline inflation outlook” over the next 12 months or so.
“We think prices will be higher, on average, next year, than in 2016. However, the more immediate worry on the inflation front is likely to come with increased wage demands,” he said.
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