The rate of price increases in the Republic has fallen to a two-year-low, with figures for July showing a 1.2 per cent rise in the annual consumer price index, down from 1.3 per cent in June. Analysts have warned this could be the last decline with inflation expected to pick up again in the coming months.
The continued decline was welcomed by the Government chief whip, Mr Seamus Brennan, who said that strong growth coupled with moderate inflation continued to be the characteristics of the Irish economy. "Strong public finances, moderate inflation and monetary stability have created the positive economic conditions we now enjoy. However, we must ensure we maintain and strengthen our competitive position and our attractiveness for inward investment in an increasing global economy" he said in a statement.
The latest figures from the Central Statistics Office show an overall monthly fall of 0.4 per cent in July, with the price of clothing and footwear, household goods and food all falling.
The summer sales saw clothing and footwear prices slashed by almost 10 per cent last month. Household goods were also reduced in the sales, falling by 2 per cent. Food was marginally cheaper with prices down by 0.3 per cent with lower prices for potatoes, fresh vegetables and mutton and lamb.
Fuel and light prices though increased, rising by 1.5 per cent in June, transport prices were 1.2 per cent higher and alcohol went up by 0.2 per cent. Despite the decline, economists are suggesting that the rate of inflation will soon be on the increase again. Irish inflation is now some way above the rates in the core euro zone, with German inflation at 0.6 per cent and the French rate at 0.4 per cent.
The latest British figures, also published yesterday, showed that the headline consumer price index rose 1.3 per cent over the past year. Excluding home loans, the annual rate rose at 2.2 per cent.
Commenting on the Irish figures, Mr Alan McQuaid, economist at Bloxham Stockbrokers, said there was every chance that by year-end,, the rate of inflation could be double its current level. Rising international oil prices - which are already leading to higher petrol prices - higher VHI charges and an increase in bus and rail fares will push prices higher this year.
"Wage inflation is likely to increase further this year against a background of ongoing wage moderation in most of Ireland's trading partners," according to Mr McQuaid. Relative hourly earnings are likely to increase, with negative implications for the competitive position of the more labour intensive sectors of industry in particular, he added. "Already there has been clear evidence of wage inflation in the construction sector."
Mr Austin Hughes, economist at Irish Intercontinental Bank, also predicts a sharp rise in inflation suggesting it will be running at close to 2.2 per cent by year end.
