Inflation returns as cost of goods surges
In further bad news for consumers, Quinn Insurance, which provides cover for one in five motorists in Ireland and insures thousands of homes, has confirmed it is likely to increase premiums by double-digit figures in the coming months.
The latest Central Statistics Office figures show the cost of living has been hit by the first annual increase since the start of 2009, driven by mortgage interest hikes, increasing bills for education and rising telecoms charges.
Mortgage interest costs climbed 10% last month alone, with clothes prices up 4.2%, air travel up 17% and insurance up 0.5%. In the 12 months to the end of August, insurance premiums rose almost 7%.
Food costs are still falling, however, and last month were down 0.2%, bringing their yearly drop to 3.3%.
The Irish Small and Medium Enterprises Association (ISME) said the future of thousands of businesses lay in the hands of the Government and it called for state-managed rates to be cut.
Chief executive Mark Fielding said: “There needs to be recognition by Government that cost competitiveness is crucial to the future of business and the future of the economy.
“The private sector has done its bit by cutting costs to the bone, just to remain in business, but these companies continue to be hammered by increases in state-imposed costs.”
Avine McNally, director of the Small Firms Association, said: “The most worrying aspect is that, for the main part, inflation is being driven by increases in public utility costs, such as education, housing, water, electricity, gas and transport, and these costs are daily input costs for businesses. When costs are passed on to the rest of the economy, competitiveness and jobs are lost and businesses close.”
Bank of Ireland economist Dr Dan McLaughlin said past research on inflation has tended to show that currency moves have a significant impact on Irish prices, given the small and open nature of the economy.
“The price of services is more likely to be determined by domestic factors, however,” he said.
Employers’ group IBEC said Ireland needs to become more competitive.
IBEC economist Reetta Suonperä said: “Although Ireland has made headway in improving its competitiveness, prices in some sectors remain too high and need to fall back in line with those of our competitors.”
Yesterday, Quinn Insurance, which is currently in administration, said that due to the cost of claims it will likely increase premiums on home and motor insurance by double-digit figures in the next three months.
The insurance company recorded an operating loss of €127m last year. It took a hit of €15m on the health insurance levy and another €15m hit on the big freeze and the floods.
