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News : Irish Economy Last Updated: Jul 10, 2014 - 4:35 PM

Irish consumer prices up 0.4% in 12 months to June 2014
By Finfacts Team
Jul 10, 2014 - 2:21 PM

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Source: Davy

Irish consumer prices on average, as measured by the CPI (consumer price index) , were 0.4% higher in June compared with June 2013.

The CSO said today that the most notable changes in the year were increases in Education (+4.5%), Alcoholic Beverages & Tobacco (+4.1%), Miscellaneous Goods & Services (+3.9%) and Restaurants & Hotels (+2.2%). There were decreases in Communications (-4.7%), Clothing & Footwear (-3.4%), Furnishings, Household Equipment & Routine Household Maintenance (-3.1%) and Food & Non-Alcoholic Beverages (-2.4%).

Consumer Prices in June, as measured by the CPI, were 0.1% higher in the month. During June of last year, prices also rose by 0.1%. The most significant monthly price changes were increases in Transport (+1.7%), Alcoholic Beverages & Tobacco (+0.8%) and Restaurants & Hotels (+0.5%). There were decreases in Clothing & Footwear (-2.6%), Food & Non-Alcoholic Beverages (-0.4%) and Furnishings, Household Equipment & Routine Household Maintenance (-0.4%).

Contributions to the overall CPI – annual change:  The areas where the largest upward contribution to the CPI in the year were Miscellaneous Goods & Services (+0.47%), Restaurants & Hotels (+0.35%) and Alcoholic Beverages & Tobacco (+0.24%).

The areas which caused the largest downward contribution to the CPI in the year were Food & Non-Alcoholic Beverages (-0.26%), Communications (-0.15%), Furnishings, Household Equipment & Routine Household Maintenance (-0.14%) and Clothing & Footwear (-0.14%).

David McNamara of Davy, commented -  - "The HICP (harmonised index of consumer prices) measure of inflation, which is used to compare prices across the EU, rose to an annual rate of 0.5% from 0.4% in May.

At face value, today’s data suggest that price pressures remain very weak in the economy. However, stripping out ECB rate cuts shows annual inflation rising to 1% over the month from 0.6%. In the year to June, mortgage interest costs fell 10%, accelerating from a 9.4% decline in May; goods inflation decreased 1.7%, easing from a 1.8% fall in May. One factor explaining this moderation in goods price deflation is the modest rise in energy prices for the second consecutive month at 0.4%, up from 0.1% in May. Recent hikes in oil prices are now putting upward pressure on inflation (Figure 2). Nonetheless, weak import prices are continuing to keep a lid on the prices of other goods.

In contrast, services prices inflation (excluding mortgage interest) ticked up to 3.3% from 3.1% over the month, the fastest pace of growth since September 2012. In particular, education costs (+4.5%), restaurants and hotels (+2.2%) and insurance costs (+6.6%) all added to the increase in services inflation. Offsetting these price rises were declines in clothing and footwear (-3.4%), food and non-alcoholic beverages (-2.4%) and communications (-4.7%).

The immediate outlook is for further modest increases in inflation. We would expect price pressures in the domestic services sector to gather pace as the economy recovers, but overall inflation will be weighed down by goods price declines and rock-bottom ECB rates.

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