Higher rents hit pockets as consumer price index rises 0.7%

Consumer prices rose 0.7 per cent in the year to the end of January, as higher rents and mortgage interest hit hard-pressed consumers.

But the Central Statistics Office said monthly figures showed a decline of 0.7 per cent, following a flat December and mirroring January 2018 as prices for clothing and footwear fell and transport costs dipped.

The annual figures showed a 4.4 per cent rise in housing costs, fuelled by rent hikes and an increase in the cost of electricity and gas. Restaurants and hotels also saw a rise, climbing 3.7 per cent as accommodation costs increased and the prices for alcoholic drinks and food rose. Tobacco prices rose during the year too, contributing to a rise of 2.7 per cent for that category.

However, this was offset in part by decreases in the cost of furnishings, household equipment and routine household maintenance, which declined 3.3 per cent, and miscellaneous goods and services, which fell 1.8 per cent. Non-alcoholic drinks and food fell 1.5 per cent.

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On a monthly basis, the fall in prices was attributed to lower clothing costs, which were down 9.2 per cent as the seasonal sales continued; cheaper transport, with prices down 3.1 per cent compared with the previous month as the cost of petrol and diesel declined; and household furniture and maintenance, which dropped by 2 per cent.

The Harmonised Index of Consumer Prices (HICP) rate was also down 0.7 per cent in the month.

Pressures muted

Cantor Fitzgerald’s Alan McQuaid said the figures showed overall inflationary pressures in the economy remained fairly muted.

"Despite strong Irish economic growth, there is as yet little sign of sustained pressure on the prices front, which appears to be the same story across the euro zone, suggesting that the European Central Bank will be in no hurry to increase interest rates," he wrote in a note. "Oil prices will be critical in determining the headline inflation outlook over the next 12 months or so, but they remain volatile and hard to predict given the uncertainty over Opec supply and geopolitical tensions in the Middle East, and there are also question marks over global demand."

He said more immediate concerns for domestic inflation came from wage demands, particularly in the public service.

“As the labour market approaches full employment levels, wage growth will pick up,” he wrote. “ In its most recent quarterly economic bulletin, the Central Bank forecast an average increase in compensation per employee of 3.5 per cent in 2019-2020, up from 2.8 per cent in 2018.”