Inflation hits 5.1% and rising

INFLATION has hit a three-year high of 5.1% and is running at more than twice the EU average.

Government hikes in VAT and excise duties have added 2% to the overall inflation rate and with electricity prices set to rise economists have warned the cost of living will jump to 5.5% later this year.

The Consumer Price Index rose by 1% in February, the highest monthly increase in three years.

The rising cost of clothes and footwear accounted for 0.5% of the increase as the end of the January sales saw a return to more normal pricing in stores.

Other significant increases included: household furnishings (+2.2%), alcohol and tobacco (+11.6%), education (+10.4%), health (+8.8%) and restaurants (+7.7%).

Friends First chief economist Jim Power warned the cost-of-living index will hit 5.5% before it starts to fall towards the middle of the year.

Irish Small and Medium Enterprise Association chief executive Mark Fielding called for the setting up of a “think tank” to urgently tackle inflation, which, he said, was out of control.

He said it was time the Government appointed economic experts, independent of the Government and Social Partners, to get the situation under control.

“They should be given the task of introducing a strategy to bring inflation rates down to at least the EU level, which has recently reduced to 2.1%.

“This process should be undertaken without delay,” he said.

IIB Bank chief economist Austin Hughes said it was clear inflation was “entrenched” across the economy and he warned it could lead to significant job losses.

Labour Party leader Pat Rabbitte said the latest figures were further bad news for consumers and the economy.

Working families and those on social welfare are living with the highest level of inflation in two years, he said.