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News : Irish Economy Last Updated: May 8, 2014 - 5:13 PM


Irish Economy 2014: Consumer prices up 0.3% in year to April
By Finfacts Team
May 8, 2014 - 2:44 PM

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Irish Economy 2014:  The CSO said today that prices on average, as measured by the CPI (consumer price index), were 0.3% higher in April compared with April 2013.

The most notable changes in the year were increases in Education(+4.5%), Alcoholic Beverages & Tobacco (+3.7%), Miscellaneous Goods & Services (+3.2%) and Restaurants & Hotels (+2.0%).  There were decreases in Clothing & Footwear (-3.7%), Communications (-3.3%),Furnishings, Household Equipment & Routine Household Maintenance(-3.1%) and Food & Non-Alcoholic Beverages (-2.1%).

Consumer Prices in April, as measured by the CPI, increased by 0.1% in the month.  During April of last year, prices remained unchanged.  The most significant monthly price changes were increases in Transport (+0.5%) and Miscellaneous Goods & Services (+0.3%).  There were decreases in Furnishings, Household Equipment & Routine Household Maintenance(-0.8%) and Alcoholic Beverages & Tobacco (-0.3%).

Contributions to the overall CPI – annual change: Table 17 shows the contribution of each 2-digit COICOP1 division to the overall change in the CPI.  A detailed breakdown of the individual components of each of the 12 COICOP divisions is presented in Tables 4 to 15.

The divisions which caused the largest upward contribution to the CPI in the year were Miscellaneous Goods & Services (+0.38%), Restaurants & Hotels (+0.30%) and Alcoholic Beverages & Tobacco (+0.21%).

The divisions which caused the largest downward contribution to the CPI in the year were Food & Non-Alcoholic Beverages (-0.23%), Clothing & Footwear (-0.17%) and Furnishings, Household Equipment & Routine Household Maintenance (-0.15%).

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

  • Miscellaneous Goods & Services rose primarily due to higher health and motor insurance premiums and the increased costs associated with the local property tax2.
  • Restaurants & Hotels increased mainly due to higher prices for alcoholic drinks and food consumed in licensed premises, restaurants, cafes, canteens etc.
  • Alcoholic Beverages & Tobacco rose 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, bread and cereals, and meat.
  • Clothing & Footwear fell due to clothing and footwear sales.
  • Furnishings, Household Equipment & Routine Household Maintenance decreased mainly due to furniture and furnishings sales.

Contributions to the overall CPI – monthly change: The divisions which caused the largest upward contribution to the CPI in the month were Transport (+0.07%) and Miscellaneous Goods & Services (+0.04%).

The divisions which caused the largest downward contribution to the CPI in the month were Furnishings, Household Equipment & Routine Household Maintenance (-0.03%) and Housing, Water, Electricity, Gas & Other Fuels(-0.02%).

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

  • Transport rose mainly due to an increase in airfares.
  • Miscellaneous Goods & Services rose primarily due to higher health insurance premiums.
  • Furnishings, Household Equipment & Routine Household Maintenance decreased due to lower prices for furniture, furnishings, household textiles and non-durable household goods.
  • Housing, Water, Electricity, Gas & Other Fuels fell due to the decreased cost of home heating oil and lower mortgage interest payments, which was partially offset by higher rents and gas prices.

CPI sub-indices: The annual rate of inflation for Services was 2.4% in the year to April, while Goods decreased by 2.4%.  Services, excluding mortgage interest repayments, increased by 3.7% in the year since April 2013.

The CPI excluding tobacco increased by 0.1% in the month of April and rose by 0.2% in the year.  The CPI excluding mortgage interest rose by 0.1% in the month and was up by 0.8% in the year. 

Harmonised Index of Consumer Prices: Prices on average, as measured by the HICP, increased by 0.4% compared with April 2013.

The most notable changes in the year were increases in Housing, Water, Electricity, Gas & Other Fuels (+4.7%),Education (+4.5%), Alcoholic Beverages & Tobacco (+3.7%) and Restaurants & Hotels (+2.0%).  There were decreases in Clothing & Footwear (-3.8%), Furnishings, Household Equipment & Routine Household Maintenance(-3.2%), Communications (-3.2%) and Food & Non-Alcoholic Beverages (-2.1%). 

The EU Harmonised Index of Consumer Prices (HICP) remained unchanged in the month.  This compares to a fall of 0.1% recorded in April of last year.

The most significant monthly price changes were increases in Transport (+0.5%) and Recreation & Culture(+0.3%).  There were decreases in Furnishings, Household Equipment & Routine Household Maintenance (-0.7%) and Miscellaneous Goods & Services (-0.5%).

1 Classification of Individual Consumption by Purpose Adapted to the Needs of Harmonised Indices of Consumer Prices (2000).

David McNamara, economist at Davy, said today -- "Headline inflation has been largely depressed by external factors, namely ECB rates and oil prices. Energy prices were down 2.2% in the year to April, while mortgage interest fell 11%. Excluding these factors would leave inflation at 1.3% – the fastest rate of growth since January 2013. Services inflation (excluding mortgage interest) rose to 3.7% in April from 3.3% in March. This is the fastest rate of growth since August 2012. In contrast, goods inflation was down 2.4% over the year, pushed down not only by energy prices but by declines in food and beverages (-2.1%) and clothing and footwear (-3.7%).

The current low levels of inflation are of course good news for many households, but many more will still be feeling prices rises in Education costs (+4.5%), Alcohol & Tobacco costs (+3.7%) and Insurance costs (+5.6%). In particular, price rises in Education and Alcohol & Tobacco are as a result of increased college fees and Budget 2014 rises in excise duty. The prices of other services such as restaurants and hotels are now growing at a more modest 2% growth rate.

The bottom line is that demand in the economy is not quite as weak as the headline inflation rate suggests. A spike in oil prices could quickly impact on inflation, while last year’s ECB rate cuts will soon wash through the annual comparison for mortgage interest costs. Consequently, we expect the inflation rate to gradually pick up in the near term but to remain below 1% for most of 2014."

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