DESPITE a 1% fall in general consumer prices last month, food and beverage costs actually increased, confirming Ireland’s unenviable tag as one of the most expensive countries in Europe for food and drink.
According to the latest figures from the Central Statistics Office (CSO), food and non-alcoholic beverage prices increased by 0.1% in June, following a 0.4% rise in May.
Bloxham Stockbrokers chief economist Alan McQuaid said the increases mark the end of an era of falling food costs. He suggested that due to the pick up in global commodity prices, the price of food was rising across the world – with some of the sharpest rises being seen in Ireland.
“A lot of it could be currency-related because Ireland has a greater percentage of trade with the US and UK than other euro countries and the weaker euro versus the dollar and sterling could be a key factor here in terms of higher import costs,” he said.
Ulster Bank chief economist Simon Barry agreed, saying the decline in the value of the euro is playing a role in higher food prices, as more than half of Ireland’s imports of food, drink and tobacco come from Britain.
“While this is undoubtedly good news from the perspective of exporters, it does have the effect of exerting upward pressure on our import prices.”
Fine Gael agriculture spokesman Andrew Doyle said consumers are being led to believe they are getting lower prices but often this isn’t the case. “This should be seen as a wake-up call to the Government.”
Mr Doyle added that there needs to be an investigation into the dominance of the big retailers.
“It is a sector that is controlled by so few.”
A recent Eurostat survey found that Irish food prices in 2009 were the second highest in the EU.
Figures released yesterday found that consumer prices fell almost 1% in the year to June, the smallest annual drop since January last year. The rate of price falls have been slowing steadily since the 6.6% drop recorded last October.
Separate CSO figures, however, showed consumer spending is improving, with an increase in the volume of retail sales in May. Retail sales measured by value, however, fell, meaning consumers are spending less but buying more.
Retail Ireland director Torlach Denihan said retailers’ ability to drop prices depended on lowering their cost base, which he said at the moment is too high.
He said wage rates and rents need to come down if retailers are to continue to drop prices. “Eventually, they will hit a wall.”
He said the retail sector is in survival mode, adding that the Government must take “decisive action” to get the Irish cost base back into line with the rest of Europe.
Farmers also hit out at the return they get on food supplies. They said the farmer’s share of the final retail price has fallen to just 20% in the case of cheese and 36% for potatoes.
Also yesterday, in a welcome relief for many mortgage holders, interest rates were held by the European Central Bank at their record 1% low, with economists expecting no hike until at least the middle of 2011.
© Irish Examiner Ltd. All rights reserved