Irish Economy
Irish Economy 2014: Annual consumer prices rose 0.3% in July
By Finfacts Team
Aug 7, 2014 - 1:05 PM

Source: Davy

Irish Economy 2014: Prices on average, as measured by the CPI (consumer price index), were 0.3% higher in July compared with July 2013 - - the CSO said Thursday that the most notable changes in the year were increases in Education (+4.5%), Alcoholic Beverages & Tobacco (+3.7%), Miscellaneous Goods & Services (+2.8%) and Restaurants & Hotels (+2.5%). There were decreases in Communications (-5.1%), Clothing & Footwear (-3.6%), Furnishings, Household Equipment & Routine Household Maintenance (-3.3%) and Food & Non-Alcoholic Beverages (-3.0%).

Consumer Prices in July, as measured by the CPI, decreased by 0.2% in the month. This compares to a decrease of 0.1% recorded in July of last year. The most significant monthly price changes were decreases in Clothing & Footwear (-7.0%), Miscellaneous Goods & Services (-1.1%) and Furnishings, Household Equipment & Routine Household Maintenance (-1.1%). There were increases in Transport (+1.8%), Restaurants & Hotels (+0.5%) and Alcoholic Beverages and Tobacco (+0.4%).

The sectors which caused the largest upward contribution to the CPI in the year were Restaurants & Hotels (+0.39%), Miscellaneous Goods & Services (+0.34%) and Alcoholic Beverages & Tobacco (+0.22%).

The divisions which caused the largest downward contribution to the CPI in the year were Food & Non-Alcoholic Beverages (-0.36%), Furnishings, Household Equipment & Routine Household Maintenance (-0.16%) and Communications (-0.16%).

The main factors contributing to the annual change were as follows:

• Restaurants & Hotels increased mainly due to higher prices for alcoholic drinks, hotel accommodation and food consumed in licensed premises, restaurants, cafes, canteens etc;
• Miscellaneous Goods & Services rose primarily due to higher health and motor insurance premiums and the increased costs associated with the local property tax;
• Alcoholic Beverages & Tobacco increased due to higher prices for alcohol sold in off licences and supermarkets and higher tobacco prices;
• Food & Non-Alcoholic Beverages decreased due to lower prices across a range of products such as vegetables, meat, bread and cereals;
• Furnishings, Household Equipment & Routine Household Maintenance fell mainly due to the reduced cost of furniture and furnishings, household textiles and non-durable household goods e.g. washing powder;
• Communications decreased mainly due to decreases in the cost of telephone and telefax equipment and telephone and telefax services.

David McNamara, economist at Davy, commented: "Inflation remained at weak levels in July. Consumer prices were up 0.3% on the year, down from 0.4% in June. Over the month, prices were down 0.2%. The HICP measure of annual inflation, which is used to compare prices across the EU, remained unchanged over the month at 0.5%.

While mortgage interest continued to act as a drag on inflation, down 9.3% in the year to July, services price inflation also eased to 3.2% yoy from 3.3% in June, while goods price deflation accelerated to -1.9% from -1.7%. Nonetheless, energy price inflation picked up to 0.8% yoy from 0.4%, impacted by recent higher oil prices.

With current low interest rates and import prices, the outlook for inflation remains weak. Nevertheless, a weaker euro may begin to put upward pressure on import prices in the second half of the year. Moreover, the recovery in the economy may soon exert some modest price pressures on domestic inflation. However, we expect inflation to remain well below 1% this year."