INFLATION IS quickening while retail sales volumes are declining, the Central Statistics Office (CSO) reported yesterday. The annual rate of inflation accelerated to 4.7 per cent in May from 4.3 per cent in April, the CSO said.
Retail sales volumes during April declined for the third successive month, indicating a marked weakening in real consumer spending.
Rising food and energy prices together with increases in mortgage interest costs have been the major contributors to inflation over the past year.
Food prices have risen by 8 per cent since May 2007, while the price of energy products has increased by 9.2 per cent. In the year to May, mortgage interest costs climbed by 16.9 per cent. Together, these three areas account for one-quarter of total consumer spending.
During May, the cost of living increased by 0.8 per cent, and over one-third of this increase was due to rising prices for energy and fuel products. However, food prices were not a major spur to inflation during May, rising by just 0.4 per cent.
Private rents fell slightly during the month, indicating a continuing weakening in the housing market.
The impact of soaring oil prices on global markets is now being felt throughout the Irish economy. Over the past year, the cost of home heating oil has risen by 47.4 per cent while the price of diesel has jumped by 23.2 per cent. In contrast, petrol prices increased by 8.2 per cent in the 12 months to May.
The annual rate of inflation for the first five months of 2008 averaged 4.6 per cent. Excluding mortgage interest, the underlying annual rate of Irish inflation quickened from 3.3 per cent in April to 3.7 per cent in May, the highest rate seen since September 2003.
The underlying rate of Irish inflation is broadly in line with the annual rate of price increase in the euro zone, where inflation was running at 3.6 per cent in the year to May.
With inflation remaining high and the economy slowing, people are cutting back on their purchases. Goods bought during April were 3.2 per cent lower than in April 2007, the largest fall in five years.
In the first four months of 2008, retail sales volumes were 0.8 per cent below sales levels in the same period of 2007.
Across all businesses, the volume of retail sales was 0.9 per cent lower in April than in March. Sales volumes through non-specialist general stores - which include supermarkets - fell by 3.3 per cent during the month. Non-specialist stores account for almost one-third of all retail sales and it is understood that smaller outlets shouldered most of the decline.
Consumer purchases of goods represent almost half of all household spending.