Irish consumer prices in April, as
measured by the CPI (Consumer Price Index), increased by 0.4% in the month. This
compares to an increase of 0.2% recorded in April of last year. Prices on
average, as measured by the CPI, were 3.2% higher in April compared with April
2010. However, deflation not inflation is still a feature of consumer sectors.
The Central Statistics Office (CSO)
said the EU Harmonised Index of Consumer Prices (HICP), which excludes housing costs, increased by 0.3% in the
month, compared with no change recorded in April of last year. Prices on
average, as measured by the HICP, were 1.5% higher in April compared with April
The most notable changes in the year
were increases in Housing, Water, Electricity, Gas&Other Fuels (+11.8%),
Miscellaneous Goods &Services (+8.6%), Communications (+4.1%) and Health
(+4.1%). There were decreases in Clothing & Footwear (-2.0%), Furnishings,
Household Equipment & Routine Household Maintenance (-2.0%) and Education
The annual rate of inflation for
Services was 4.4% in the year to April, while Goods increased by 1.6%.
The most significant monthly price
changes were increases in Transport (+1.0%), Miscellaneous Goods & Services
(+1.0%) and Housing, Water, Electricity, Gas & Other Fuels (+0.9%). There was a
decrease in Food & Non-Alcoholic Beverages (-0.5%).
The main factors contributing to the
monthly change were as follows:
Transport rose mainly due to an
increase in airfares and higher petrol and diesel prices;
Miscellaneous Goods & Services
rose due to higher premiums for health, home and motor car insurance;
Housing, Water, Electricity, Gas
& Other Fuels rose due to higher mortgage interest repayments and an
increase in the cost of home heating oil;
Food & Non Alcoholic Beverages
fell due to lower prices across a wide range of food items.
The CPI excluding tobacco for April
increased by 0.4% in the month and was up by 3.2% in the year. The CPI excluding
energy products rose by 0.4% in the month and increased by 2.3% in the year.
The CPI excluding mortgage interest increased by 0.4% in the month and was up by
1.9% in the year.
Goodbody economist, Juliet
continues with headline CPI rising to 3.2% yoy
Inflation at a 30-month high - Forces outside Ireland’s domestic
control continue to exert an upward influence on the rate of inflation with the
CPI increasing by 3.2% yoy in April, the highest rate since October 2008. The
more instructive HICP rose to 1.5% in April, continuing to close the gap on
euro-zone inflation which stood at 2.8%;
Energy, mortgages and insurance are the major drivers with domestic
sectors still dealing with deflation - Energy prices in Ireland rose by
13% yoy in April, contributing c. a third to yoy inflation, while mortgage
interest accounted for c.40% of the increase in the CPI;
Insurance rose 16% yoy accounting
for a further 20% of the increase. Sectors exposed to the domestic sectors like
Restaurants & Hotels (-1% yoy) and Household goods (-2% yoy) are still seeing
We view the increase in headline inflation as transitory - Given
the weak domestic environment, particularly in relation to the labour market
where wage inflation is unlikely, we view the increase as transitory.
Nevertheless, the rise in headline inflation in the short-term does reduce
consumers' discretionary income.
Commenting on the latest CSO
consumer price index (CPI), IBEC chief economist Fergal O'Brien said:"We have seen a largely commodity-fuelled increase in the CPI in the
early months of this year, but inflation rates are likely to ease during the
second half. The main contributors to the rise have been commodity prices and
mortgage interest. While there will be further increases in mortgage interest in
the coming months as the ECB increases are passed on to householders, other
issues are likely to ease the overall inflationary pressures in the economy.
"Government's decision to cut the lower VAT rate by 4.5% on a selected basket of
items will feed through to the CPI and about 10% of the index's overall basket
of goods and services will benefit from this - this should therefore cut close
to 0.5% off the CPI in a full year.
"Core inflation still remains low in Ireland and the increase in the harmonised
index, which excludes the mortgage interest component, is likely to average
about 1.5% this year. The CPI will increase by about 2.5% this year but we think
that the monthly observations will ease back over the coming months and
inflation next year is unlikely to exceed 1.5%. The focus over the coming months
must remain on reducing costs across the economy and regaining competitiveness,"