Ireland’s inflation rate drops to 7.2% but it will bring little relief to households

Ireland’s inflation rate slowed for a second month in a row in April, but the drop will bring only limited relief to households because of rapidly rising food prices.

According to the Central Statistics Office (CSO), consumer prices rose at an annual rate of 7.2 per cent last month. This was down from an annual rate of 7.7 per cent recorded in March.

The agency’s latest Consumer Price Index (CPI) shows food prices were up by more than 13 per cent year on the year and by 0.6 per cent in April alone. The CSO said rising food costs reflected an increase in prices across a range of products such as sugar (38.9 per cent), milk (24.1 per cent), butter (18.9 per cent), and eggs (18.3 per cent) compared with April 2022.

Economists are worried that the initial surge in energy prices, which has now softened, has nonetheless bid up prices in other areas such as food and services.

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Consumer prices have been rising on an annual basis since April 2021, with annual inflation of 5 per cent or more recorded in each month since October 2021.

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The largest annual increases in April were seen in the cost of housing, water, electricity, gas and other fuels, which rose almost 21 per cent. In the year to April electricity prices were up by 51.3 per cent, while gas prices were 55.8 per cent higher over the year. Rising rents and mortgage interest also piled the pressure on, with private rents up by nearly 9 per cent on an annual basis.

The CSO said the cost of education and transport were the only sectoral divisions to show a decrease when compared with April of last year, with prices falling by 6.3 per cent and 2.3 per cent respectively.

Robert Purdue, foreign exchange dealer with Ebury Partners Ireland, said: “Further declines in the headline inflation number will raise hopes that the worst of the cost-of-living crisis is now behind us. Yet CPI has continued to ride above 5 per cent since October 2021, which will have embedded many of the price rises causing pain for consumers.”

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“Stubborn inflation and a damaging wage spiral are the main fears within the ECB, confirmed by the 25 basis point hike last week, with Lagarde commenting that there is still more ground to cover. Indeed, inflation remains significantly above its 2 per cent target, and until it is far closer to that level it seems that the ECB will be keen to act forcefully,” he said

“Market expectations of barely two more 25 basis points moves strike us as too optimistic given the stickiness of core inflation in the euro zone. We look for at least three more hikes and consequent common currency strength.”