FUEL PRICES sent the cost of living as measured by the Consumer Price Index (CPI) up 1 per cent in March, pushing the annual rate of inflation back up to 2.2 per cent.
Petrol prices rose 3.3 per cent last month, and are up 9 per cent on last year, while diesel costs are up 1.8 per cent monthly and by 9.2 per cent on an annual basis, the figures from the Central Statistics Office show.
Increases in health insurance premiums also contributed to the monthly rise in prices, while clothing and footwear costs rose as retailers ended winter sales.
Over the past year, consumers have been hit by higher energy and transport prices, and have also seen jumps in the cost of third-level education and insurance premiums.
The squeeze on disposable incomes as a result of these price rises has forced cuts in the cost of items associated with discretionary spending such as clothing, home furnishings and recreation costs, such as sports club subscriptions and gardening equipment.
Conall MacCoille, an economist at Davy Research, described the inflation numbers as evidence that price pressures in the economy “are somewhat stronger than we expected”.
The stronger rate of CPI inflation would “eat into households’ real incomes, which are already under pressure”, he said. “Sustained inflationary pressure is bad news for Irish consumer spending.”
The annual rate of CPI inflation in March compares to a 2.1 per cent rate in February and a 2.2 per cent rate in January.
The Harmonised Index of Consumer Prices (HICP), a pan-European measure that excludes the cost of mortgage interest, also rose 1 per cent in March, taking the annual rate to 2.2 per cent, up from 1.6 per cent in the previous month. The gap between this rate and inflation in the euro zone as a whole has narrowed, with euro zone inflation estimated at 2.6 per cent in March. Ibec economist Reetta Suonperä said the “sharp jump” in the HICP measure compared to the previous month “should sound a warning bell to Government”.
She said recent Government decisions, such as the increase in the top rate of VAT, was exacerbating price pressures, adding that many retailers had not passed on the 2 percentage point rise in VAT as they were already struggling with weak demand from consumers.
“Throughout the crisis Ireland’s inflation has been one of the lowest in the euro zone, allowing a significant improvement in competitiveness,” Ms Suonperä said.
“It is crucial that Government decisions do not undo the efforts of the private sector to restore Ireland’s competitive position.”
Transport costs, which account for a 15 per cent weighting of the CPI, surged 4 per cent in March as a result of the higher petrol and diesel prices, and also as a consequence of a likely temporary surge in air fares.
According to survey figures from AA Ireland, the average price per litre for petrol in March was 162.1 cent, compared to 149.4 a year earlier, while diesel prices rose from 145 cent to 157.7 cent per litre over the same period.
