Consumer prices rose significantly last month, fuelled by rising mortgage costs and the continuing impact of high energy prices.
The annual rate of inflation jumped to 3.3 per cent, a level last seen in June 2003, according to Consumer Price Index (CPI) data released yesterday by the Central Statistics Office. Inflation stood at 2.5 per cent last December.
Analysts were quick to react to the figures. Describing the figures as a "Valentine's Day Massacre", Ulster Bank chief economist Pat McArdle said the increases were stronger than expected. "This was well above all forecasts - the range was 2.7 per cent to 3.1 per cent, with the consensus around 3 per cent."
December's interest rate rise, as well as higher energy costs contributed to a 12.3 per cent rise in the housing, water, electricity, gas and other fuels category.
Yesterday's figures also do not take account of the most recent interest rate rise announced by the European Central Bank earlier this month.
Public services such as transport, health and education all recorded higher than average inflation last month. The end of the Christmas sales also saw prices for clothing and footwear rise.
Inflation in other sectors of the economy was more modest and food prices actually fell slightly year-on-year, according to the CSO figures. The cost of furniture and household products was also down, while the price of telecoms services was 1.3 per cent lower than in February last year.
Increases in the price of alcohol and tobacco were stronger than expected, although lower than the average for the CPI basket of goods.
On an EU-harmonised basis, the Irish inflation rate was 2.7 per cent last month compared with a euro-zone average of 2.3 per cent.
Opposition politicians blamed the rise on Government economic policies yesterday, while business representatives warned of job losses in the manufacturing sector.
Despite concerns about rising prices, retail sales figures also published yesterday by the CSO testify to the buoyancy in the sector, with the value of sales in January up 11 per cent year-on-year and 5.4 per cent ahead of the previous month.
Excluding sales of motor vehicles, sales rose 8.9 per cent by value over the 12-month period and 2.8 per cent in January alone. In volume terms, retail sales were 9 per cent stronger than last year. Stripping out motor sales, the figure is 7.9 per cent.
Friends First economist Jim Power blamed the increase in inflation on weaker competition in the services sector, including the Government sector, as well as strong credit expansion
"The services side of the economy is still most prone to price pressures, whereas intense competition is continuing to bear down on inflation in the goods side of the economy," he said.
"The State continues to be an important driver of inflation in the economy. In any discussion about rip-off Ireland, the State sector needs to stand up and take a considerable portion of the blame, rather than looking for easy victims, as politicians tend to do."
"Today's CPI figures show that Ireland's inflation rate continues to rise faster than the rest of EU," said Fine Gael finance spokesman Richard Bruton.
"Consumer prices this February increased by 1.1 per cent in comparison to 0.8 per cent in February last year."