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News : Irish Economy Last Updated: Jun 13, 2014 - 8:09 AM

Irish Economy 2014: Consumer prices 0.4% higher in May compared with May 2013
By Finfacts Team
Jun 12, 2014 - 4:54 PM

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Irish Economy 2014: The CSO said today that consumer prices as measured by the CPI (consumer price index) was 0.4% higher in May compared with May 2013 - - The most notable changes in the year were increases in Education(+4.5%), Miscellaneous Goods & Services (+4.0%), Alcoholic Beverages & Tobacco (+3.4%) and Restaurants & Hotels (+2.2%).  There were decreases in Communications (-4.7%), Clothing & Footwear (-3.5%),Furnishings, Household Equipment & Routine Household Maintenance(-3.2%) and Food & Non-Alcoholic Beverages (-1.9%).

Consumer Prices in May, as measured by the CPI, remained unchanged in the month.  During May of last year, prices fell by 0.1%.  The most significant monthly price changes were increases in Restaurants & Hotels(+0.7%), Miscellaneous Goods & Services (+0.5%) and Recreation & Culture (+0.5%).  There were decreases in Transport (-1.5%) and Clothing & Footwear (-0.4%).

Contributions to the overall CPI – annual change

The divisions which caused the largest upward contribution to the CPI in the year were Miscellaneous Goods & Services (+0.48%), Restaurants & Hotels (+0.34%) and Alcoholic Beverages & Tobacco (+0.20%);

The divisions which caused the largest downward contribution to the CPI in the year were Transport (-0.27%),Food & Non-Alcoholic Beverages (-0.21%) and Clothing & Footwear (-0.16%).

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 tax;
  • Restaurants & Hotels increased due to higher prices for alcoholic drinks, hotel accommodation 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;
  • Transport decreased mainly due to a reduction in the price of motor cars, lower petrol and diesel prices and a fall in airfares;
  • Food & Non-Alcoholic Beverages decreased due to lower prices across a range of products such as vegetables, bread and cereals, meat and fruit;
  • Clothing & Footwear fell due to clothing and footwear sales.

Conall Mac Coille, chief economist at Davy comments - - "Today’s CPI inflation data are reasonably encouraging, showing a marginal increase to 0.4% in May but rising from the -0.1% trough in February. Nonetheless, at face value, the Irish CPI index suggests that price pressures remain very weak, posing the same disinflationary risks to Irish GDP growth as in the broader euro area economy. The rise in May should help to somewhat alleviate these concerns. However, a key point is that stripping out the impact of ECB rate cuts and lower energy prices, clearly positive developments helping Irish consumers’ spending power, shows that underlying inflation has been broadly stable at close to 1% (Figure 1). Indeed, services prices (ex-mortgage interest) are up 3.1%, suggesting some modest pricing power in the domestic economy. Today’s tourism data provide some further good news, suggesting that the momentum from the recovery in the tourism sector last year has been maintained into 2014. Trips to Ireland by non-residents rose by 7.2% in the year to Q1 2014.

Irish CPI inflation rate rose to 0.4% in May, up from 0.3% in April. Prices were flat on the month. Falling energy and import prices and the impact of ECB rate cuts have helped push down on Irish CPI inflation. Figure 1 illustrates that CPI inflation excluding energy and mortgage interest was 1% in May – stronger than the headline rate. Similarly, falling import prices have also helped consumers’ real incomes. Weak import price inflation is evident in goods price deflation of -1.8%, in contrast to services prices up 2.0% on the year. For example, food and beverage prices are down by 1.9% in the year to May, clothing and footwear by 3.5% and furnishings & household equipment by 3.2%. These items represent over 20% of the CPI basket. In contrast, restaurants and hotels prices are up 2.2%, recreation services 2.7% and miscellaneous services 7.1%. The pick-up in services prices points to some modest pricing power within the domestic economy. Services prices (excluding mortgage interest) rose by 3.1% in the year to May."

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