Irish consumer prices on average, as measured by the CPI (consumer price index), were 0.3% lower in December compared with December 2013. Meanwhile, the CSO also reported Thursday that data for November 2014 show that seasonally adjusted exports fell by €520m (-7%) to €7.03bn from October 2014. Coupled with an increase in seasonally adjusted imports of €79m (+2%), the seasonally adjusted trade surplus dipped by €599m (-21%) to €2.30m in the month. Exports also dropped in the 12 months to November.
The CSO said that the most notable price changes in the year were decreases in Transport (-3.8%), Furnishings, Household Equipment & Routine Household Maintenance (-3.1%), Food & Non-Alcoholic Beverages (-2.6%) and Clothing & Footwear (-2.3%). There were increases in Education (+5.0%), Miscellaneous Goods & Services (+4.2%) and Alcoholic Beverages & Tobacco (+3.0%).
Consumer Prices in December, as measured by the CPI, declined by 0.4% in the month. During December of last year, prices remained unchanged. The most significant monthly price changes were decreases in Transport (-1.3%), Alcoholic Beverages & Tobacco (-1.3%) and Housing, Water, Electricity, Gas & Other Fuels (-0.8%). There were increases in Miscellaneous Goods & Services (+0.2%), Clothing & Footwear (+0.2%) and Health (+0.1%).
The CSO said that comparing November 2014 with November 2013, the value of exports dropped by €273m (-4%) to €7.46bn. There was a dip of €734m (-39%) in Organic chemicals. Exports of Medical and pharmaceutical products increased by €536m (+33%). A comparison of the non-seasonally adjusted exports for January to November 2014 and January to November 2013 shows an increase of €925m (+1%).
On an overall basis the EU accounted for €4.28bn (57%) of total exports in November 2014. The USA was the main non-EU destination accounting for 22% (€1.65bn) of total exports in November 2014.
Imports of road vehicles up
Comparing November 2014 with November 2013, the value of imports increased by €101m (+2%) to €4,548m. The main driver was an increase in the imports of road vehicles of €94m (+52%). Comparing non-seasonally adjusted imports for January to November 2014 and January to November 2013 shows an increase of €3.23bn (+7%). The EU accounted for 63% of the value of imports in November 2014, with 30% of total imports coming from Great Britain. The USA (10%) and China (8%) were the main non-EU sources of imports.
Conall Mac Coille, chief economist, at Davy, commented on the price falls: "The -0.3% CPI inflation rate in December will surely raise fears that Ireland’s recovery may be threatened by deflationary pressures. However, the recent decline clearly reflects lower energy prices and mortgage interest costs – positive developments for the consumer – global factors rather than the weakness of the domestic economy.
As in the UK and US, Ireland’s recovery is clearly gathering momentum despite weak price trends. GDP looks set to expand by 5% in 2014, translating into a fresh low in the unemployment rate of 10.6% in December and also buoyant tax revenues. Investors will also be reassured by the pick-up in residential and commercial property prices and rents through the year. Today’s release shows private rents up 8.0% year-on-year.
Decomposing the fall in Ireland’s CPI inflation rate reinforces the view that deflationary pressures are coming from external forces. Mortgage interest costs and energy prices have fallen by 10.6% and 5.5% respectively in the year to December. Excluding these items, CPI inflation was 0.8%.
These are clearly positive developments that will help to push up on Irish households’ disposable incomes and real spending power in 2015. Goods prices fell by 2.1% in the year to December, also pushed down by lower import prices. In contrast, services price inflation was 2.8% in December, indicative of some pricing power in the domestic economy.
It is therefore difficult to be too concerned by a negative CPI inflation number primarily driven by falling oil prices. Not only is GDP expanding – but it is translating into improvements in the labour market, tax revenue growth and recovering asset prices. That said, some of the weakness in Irish CPI inflation does reflect muted wage growth – itself constraining opportunities for new bank lending as debt from the bubble years is slowly paid down."