Irish consumer prices in December
2010, as measured by the CPI, increased by 0.2% in the month. This compares to a
decrease of 0.5% recorded in December of last year. Prices on average, as
measured by the CPI, were 1.3% higher in December compared
with December 2009.
This analysis compares the annual average rates of inflation for
2010 with the annual average rates of inflation for 2009.
The annual average rate of inflation in 2010 was -1.0%. This
compares to a rate of -4.5% for 2009 and +4.1% for 2008. The largest annual
price fall for the year was recorded in January, when prices on average fell
3.9% compared to the previous January.
The EU Harmonised Index of Consumer
Prices (HICP) increased by 0.2% in the month, compared to a decrease of 0.5%
recorded in December of last year. Prices on average, as measured by the HICP,
were 0.2% lower in December compared with December 2009.
The Central Statistics Office (CSO)
said today that the most notable changes in the year were increases in Housing,
Water, Electricity, Gas &Other Fuels (+9.9%), Transport (+3.7%) and
Miscellaneous Goods & Services (+3.4%). There were decreases in Clothing &
Footwear (-4.1%), Alcoholic Beverages & Tobacco (-3.0%) and Education (-3.0%).
The annual rate of inflation for
Services was 2.1% in the year to December, while Goods increased by 0.5%.
The most significant monthly price
changes were increases in Transport (+1.8%), Miscellaneous Goods & Services
(+1.2%) and Housing, Water, Electricity, Gas & Other Fuels (+0.6%). There were
decreases in Clothing & Footwear (-2.2%) and Alcoholic Beverages & Tobacco
The main factors contributing to
the monthly change were as follows:
Transport rose mainly due to
increases in petrol and diesel prices.
Miscellaneous Goods & Services
rose due to increases in hairdressing prices and higher premiums for private
health andmotor car insurance.
Housing, Water, Electricity, Gas
& Other Fuels rose due to an increase in the cost of home heating oil.
Clothing & Footwear fell due to
Alcoholic Beverages & Tobacco
fell mainly due to lower prices for wine and spirits sold in off licences
There were decreases in 6 of the 12 main commodity groups
during the year. Some of the most notable changes are as follows:
Clothing & Footwear
prices decreased on average by 9.4% during the year due to more frequent
Beverages prices decreased by 4.5% during the year with food prices falling
by 4.6% and non-alcoholic beverages prices falling by 3.6%.
Electricity, Gas & Other Fuels costs increased by 1.3% during the year
compared to a decrease of 22% in 2009. This was primarily due to increases
in average mortgage interest repayments (+6.4%) and a significant increase
in the cost of home heating oil (+31.5%).
Energy products increased
by 9.6% in the year compared to a decrease of 7.9% in 2009 and an increase
of 8.8% in 2008.
During 2010, the average
price of goods fell by 2.2% while the average price of services (which
includes mortgage interest) rose by 0.2%. During 2009, the average price of
goods fell by 4.3% while the average prices of services declined by 4.6%.
The CPI excluding tobacco index for
December increased by 0.3% in the month and was up by 1.4% in the year. The CPI
excluding energy products fell by 0.2% in the month and increased by 0.2% in the
year. The CPI excluding mortgage interest increased by 0.3% in the month and was
up by 0.2% in the year.
Davy Research economist, Conall
Consumer price inflation picks up in
- The CSO release for December indicates that
CPI inflation rose by 0.2% month-on-month (mom). On an annual basis, CPI
inflation was 1.3% in December, its highest rate since November 2008.
- As in other countries, the pick-up in CPI
inflation can largely be attributed to energy and utility prices. Housing,
water, electricity and other fuels rose by 9.9% in the year to December.
- The CSO release also indicates that
transport prices rose mainly due to increases in petrol and diesel prices.
Energy price rises more than accounted for the entire increase in consumer
prices in the year to December.
- In contrast, the prices of clothing and
footwear, alcoholic beverages, tobacco, restaurants and hotels all made
significant negative contributions to the annual inflation rate.
EU HICP measure indicates that Ireland is
still in deflation
- The annual rate of HICP inflation in
December was -0.2%. So inflationary pressures appear more muted when the
impact of mortgage costs is excluded in the EU harmonised measure.
- The HICP index rose by 0.2% mom in December.
Goodbody Stockbrokers' chief economist, Dermot
The global trend of higher inflation
is also happening in Ireland, but we think it is premature to call the
deflationary period for the Irish economy to restore competitiveness over.
Inflation making a comeback... - After two years of deflation,
inflation seems to be returning to Ireland. Headline CPI rose by 1.3% yoy in
December, the biggest annual increase since November 2008. Our preferred
indicator of inflation - the HICP - is also on the verge of registering annual
price increases for the first time in two years; in December, the HICP fell 0.2%
yoy, relative to -0.8% yoy in November. This compares to 2.2% in the euro-area.
...largely due to external factors - Similar to the inflation
spike of 2008, the increase is being led by forces which are largely outside the
control of domestic policy. Firstly, energy prices are having a major impact,
with the price of energy products increasing by 14% yoy in December. This has
been a feature globally over recent months. Secondly, increasing mortgage
interest costs are having an impact on the CPI (but not the HICP).
Food prices to increase further - While food prices fell
significantly over the 2009/2010 period, there are now signs that this is
beginning to be reversed, albeit slowly. In December, the price of food and non-aloholic
beverages grew by 0.1% yoy, its highest inflation rate since February 2009. With
UK food inflation running at 6% currently and such a large presence of UK
multiples based here, this upward trend is likely to continue in the coming
Price falls continue in the leisure sector – Deflation is still
very much evident in sectors that are exposed weak consumer demand. The price of
recreation and culture activities fell by 1.9% yoy in December and restaurants
and hotels saw deflation of 2.2% in December. These industries continue to
attempt to spur demand through discounting.
Too early to call deflation over - The rise in energy and food prices
internationally may prove to just have a transitory effect on inflation, but
this, of course, is beyond Ireland’s control. Outside of these, global inflation
pressures are low. Therefore, we think it would be premature to call the
deflationary period to regain competiveness in the economy over, whether it be
reflected in domestic wages or the general level of consumer prices.