Cost of living rises at fastest rate in two years

THE cost of living is increasing at its fastest rate in more than two years, with food, clothes, mortgages and rent on the rise.

Rising fuel prices linked to the Libyan uprising, severe hikes in health insurance premiums and an end to sales last month also hit households in the pocket.

The annual rate of inflation is at 2.2% after seven months of steady rises — a level not seen since November 2008.

Figures from Tesco also show more people are cutting back by bringing lunches to work. The price of bread was up almost 2% while the price of butter increased close to 4%. Alcohol prices jumped more than 2% in February while air fares soared 21%.

The sale of butter has jumped 15% in the last year, while the value of bread is up 12%, according to Tesco. Cheese sales are up about 4%, while cooked and sliced meats are up 12%. The sale of other lunchbox items, such as small bananas and apples, is up 15%.

Financial adviser Frank Conway said the move to self-sufficiency makes perfect sense financially.

“Even if you take much the same lunch from home, you would be able to reduce the annual cost of lunch by half,” he said.

It is estimated that workers could save between €650 and €820 a year by bringing their lunch to work.

“Think of what that would pay for — home heating or car tax or car insurance or even a family break,” said Mr Conway.

The Central Statistics Office inflation report found that household bills such as power, heat, fuel and mortgage repayments, followed by personal goods, were the hardest hit in the last year.

Some of the biggest price hikes were in the insurance market where health premiums soared by 14.4% last month and air travel, which jumped by 21%.

Prices on the high street jumped last month as traditional winter sales finished in February.

Paul Sweeney, economic adviser to the Irish Congress of Trade Unions, said increasing prices are putting impossible pressure on ordinary working people.

“And we can now expect further increases in interest rates and in commodity prices along with the proposed rise in VAT,” Mr Sweeney said.

“The incoming Government needs to bear this increased cost of living in mind, when framing policy.”

Congress also claimed the overall cost of living is 26% more expensive than the EU average.

In further bad news for households, employers’ group IBEC said employers should not entertain requests for pay increases this year.

The group said pay levels remain up to 20% higher than our main trading partners and according to a survey of members, pay freezes are going to be the norm for 2011, with some firms still reducing wages.