|Source: CSO/ Davy|
Irish Economy 2014: The CSO reported Thursday that prices on average, as measured by the CPI (consumer price index), were 0.4% higher in August compared with August 2013.
The most notable changes in the year were increases in Education (+4.5%), Alcoholic Beverages & Tobacco (+3.9%), Miscellaneous Goods & Services (+2.9%) and Restaurants & Hotels (+2.8%). There were decreases in Communications (-4.6%), Food & Non-Alcoholic Beverages (-2.6%), Clothing & Footwear (-2.0%) and Furnishings, Household Equipment & Routine Household Maintenance (-1.9%).
Consumer Prices in August, as measured by the CPI, increased by 0.2% in the month. This compares to an increase of 0.1% recorded in August of last year. The most significant monthly price changes were increases in Clothing & Footwear (+6.0%), Furnishings, Household Equipment & Routine Household Maintenance (+1.4%) and Restaurants & Hotels (+0.5). There were decreases in Transport (-0.6%), Recreation & Culture (-0.5%) and Alcoholic Beverages and Tobacco (-0.5%).
Contributions to the overall CPI – annual change:
The sectors which caused the largest upward contribution to the CPI in the year were Restaurants & Hotels (+0.43%), Miscellaneous Goods & Services (+0.34%) and Alcoholic Beverages & Tobacco (+0.23%);
The sectors which caused the largest downward contribution to the CPI in the year were Food & Non-Alcoholic Beverages (-0.29%), Communications (-0.14%) and Furnishings, Household Equipment & Routine Household Maintenance (-0.09%);
The main factors contributing to the annual change were as follows:
- Restaurants & Hotels increased mainly due to higher prices for alcoholic drinks, hotel accommodation and food consumed in licensed premises, restaurants, cafes, canteens etc;
- Miscellaneous Goods & Services rose primarily due to higher health and motor insurance premiums and the increased costs associated with the local property tax;
- Alcoholic Beverages & Tobacco increased 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, meat, bread and cereals;
- Communications decreased mainly due to decreases in the cost of telephone and telefax equipment and telephone and telefax services;
- Furnishings, Household Equipment & Routine Household Maintenance fell mainly due to the reduced cost of furniture and furnishings, household textiles and glassware, tableware and household utensils.
David McNamara, economist at Davy, commented - - "Inflation continued to rise modestly in August, with prices up 0.4% on the year and up from an annual rate of 0.3% in July. Over the month, prices were up 0.2%. The HICP measure of inflation, which is used to compare prices across the EU, rose to an annual rate of 0.6% from 0.5% in July.
At face value, these 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 0.8% in July. In the year to August, mortgage interest costs fell 9.8%, accelerating from a 9.3% decline in July. Goods inflation decreased 1.6%, easing from a 1.9% fall in July, pushing up on overall inflation. However, energy prices declined again in August, down 0.3% year-on-year, following three consecutive months of price rises, impacted by lower oil prices.
In contrast, services prices inflation (excluding mortgage interest) was up 3.1% in August, down marginally from 3.2% in July. In particular, education costs (+4.5%), alcohol & beverages (+3.9%), restaurants and hotels (+2.8%) and insurance costs (+4.3%) all added to the increase in inflation. Offsetting these price rises were declines in clothing and footwear (-2.0%), food and non-alcoholic beverages (-2.6%) and communications (-4.6%).
With current low interest rates and energy prices, the outlook for inflation remains weak. The recovery in the economy may soon exert some modest price pressures on domestic inflation, but we expect inflation to remain well below 1% this year."