Inflation rose sharply in January as utility and energy prices rose along with public service prices. Marc Coleman, Economics Editor, reports.
The latest Consumer Price Index (CPI) from the Central Statistics Office shows that annual inflation accelerated to 3 per cent in January. Inflation rose from 2.1 to 3 per cent between June and September, but had eased back to 2.5 per cent by December.
Among components of the index, prices in the category of housing, water, electricity, gas and other fuels - which captures the impact of both last summer's oil price rises and December's increase in European Central Bank interest rates - rose by 12.1 per cent in annual terms.
The rate of public sector price increases continued to outpace average inflation. Transport service prices rose by 5.1 per cent in January, while the cost of education and health services climbed by 4.9 and 4.2 per cent respectively.
By contrast, clothing and footwear prices fell in annual terms, as did the cost of furniture, household goods and maintenance, food and non-alcoholic beverages. The annual rate of inflation for goods was 1.4 per cent, compared to 4.4 per cent for the services sector.
Ulster Bank economist Pat McArdle attributed January's inflation performance to a delayed passing on of higher interest rates to consumers, as well as to the impact of exceptionally low prices recorded in the base month of January 2005.
Last summer's oil price rises would continue to affect inflation until mid-year, he said, while further interest rate rises would drive inflation higher.
"We expect energy prices to add 0.2 per cent, bringing the annual rate to 3.2 per cent."
The increase has been condemned by both the Labour party and small business lobby Isme.
Kathleen Lynch, Labour party TD and spokeswoman on consumer affairs, accused the Government of failing to control prices. "Inflation is on the way up again. This is the clear message from the consumer price index figures published today."
Mark Fielding, Isme chief executive of the small business lobby, said: "Inflation was down to a little over 1 per cent when the Rainbow government left office in mid-1997. It has been permanently above that figure during the lifetime of the Fianna Fáil / PD Government."
Mr Fielding blamed higher inflation on increases in public sector costs.
"In the last five years the CPI increased by 24 per cent, while electricity increased by 53 per cent, health 51 per cent and local charges a massive 218 per cent."
The Harmonised Index of Consumer Prices (HICP), an alternative measure of inflation used by the the European Central Bank, put the inflation rate at 2.5 per cent in January.
Ireland's rate of HICP inflation remains close the euro area average, but this measure excludes the impact of interest rate increases from its calculation.
