CONSUMER PRICES rose by 2.5 per cent in the year to December 2011, according to new Central Statistics Office data.
A 0.3 per cent fall over the month pushed the inflation rate lower, from the 2.9 per cent recorded over the 12 months to the end of November.
The annual price rises were fuelled by an 8.9 per cent rise in the cost of education, while housing and utilities were 8.4 per cent higher for the 12 months to the end of December. Health costs increased throughout the year too, rising by 2.6 per cent in the year to December.
Sales dragged the cost of furnishings and household maintenance lower, falling by 1.9 per cent over the 12 months, while prices at restaurants and hotels declined by 0.9 per cent.
The rate of inflation for services – including mortgage interest – was 3.6 per cent for the 12-month period, and goods prices rose by 0.9 per cent.
Over the month of December, prices for housing, water and fuels were down by 1.4 per cent, driven by lower mortgage interest repayments. Clothing and footwear was 1.1 per cent cheaper than in November, and the cost of transport declined slightly as the price of second-hand cars and petrol fell.
Meanwhile, the EU Harmonised Index of Consumer Prices (HICP) fell by 0.1 per cent compared with November, and was 1.4 per cent higher over the year.
Davy chief economist Conall Mac Coille said ECB rate cuts and reductions in the price of oil were now “bearing down” on the CPI inflation rate.
“Underlying inflationary pressures remain weak, with the bulk of the 2.5 per cent CPI inflation still accounted for by energy and mortgage interest,” he said. The pressure on households’ spending power due to price rises would fall in 2012, he added.
Bloxham predicted average headline price inflation of no more than 1.5 per cent in 2012, compared to 2.6 per cent in 2011.
“Inflationary pressure is coming off around the world. That’s encouraging. Soaring oil and commodity prices threatened an inflationary wave in emerging economies in 2011 which might easily have drowned their fast growth. But the inflation easing has come in part because monetary policy had to tighten and Europe has weakened,” said chief economist Alan McQuaid.
“As regards Ireland, domestic inflationary pressures are likely to remain subdued for some time to come. Continued weak consumer demand will put downward pressure on prices in the coming months, though the indirect tax changes announced in Budget 2012 will add to the CPI.”
Retail Ireland said the figures showed there was a high level of value for consumers in the sector.
“The level of precautionary savings in the economy remains very high,” said Frank Gleeson, chairman of Retail Ireland. “A key priority for Government must be to boost consumer confidence and restore domestic demand. This is central to restoring our economic fortunes.”
Meanwhile, Isme, the Irish Small Medium Enterprises Association, called for the Government to address the increasing cost burden on business caused by State-imposed costs.
