Irish inflation moderates to 8.2%, marking second consecutive monthly decline

Irish inflation moderated to 8.2 per cent in September from 8.7. per cent in August, the second consecutive monthly decline in the annual rate of consumer price increase, the Central Statistics Office (CSO) said on Thursday.

Prices have been rising steadily since April last year, triggering the worst cost-of-living squeeze in decades, with consumer price inflation topping 5 per cent for 12 months in a row.

The headline inflation rate declined from 9.1 per cent in August to 8.7 per cent in September, the first drop-off in seven months.

The most significant price increases in the year to September were housing, water, electricity, gas and other fuels (+20 per cent) and transport (+11.3 per cent). Within this category, electricity prices were up 36.2 per cent from September 2021, gas was up 53.1 per cent, with home heating oil up 83.8 per cent and solid fuels up 32.5 per cent in the year.

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The CSO said that transport prices increased “primarily due to a rise in prices for cars, diesel, petrol and services in respect of personal transport equipment”. However, this increase was partially offset by lower prices for passenger transport by bus and coach and by railway.

On a monthly basis, overall consumer prices were unchanged in September from August despite a 3.6 per cent decline in transport prices, mainly due to lower prices for air fares, petrol and other services. The price of petrol, up more than 15 per cent from September 2021, declined 5.7 per cent last month from August in line with a fall in global crude oil prices. Diesel, up 32.5 per cent over 12 months, fell 0.4 per cent in the month.

The monthly decline in transport prices was partially offset by an increase in the price of cars, the CSO said, which were 0.5 per cent more expensive in September and more than 11 per cent for the year. Globally, the production of cars has been stymied by shortages of microchips over the past 12 months, pushing up retail prices amid booming demand for new and used vehicles.

Soaring prices could drag the economy into a technical recession – defined as two consecutive quarters of economic contraction — in the coming quarters, the Central Bank warned in its latest quarterly economic bulletin last week, as households and businesses struggle to keep pace with inflation.

Irish inflation is expected to peak at 8 per cent for this year as a whole, before easing to 6.3 per cent next year and 2.8 per cent in 2024, the bank said.

“There remain upside risks to the inflation forecast and downside risk to the growth forecast,” it said. “Much of the slowdown in growth forecast in the second half of this year and early next year is contingent on currently high energy prices stabilising, alongside a smooth transition to more sustainable energy supply.”

A “more intense and protracted” war in Ukraine or “a less favourable growth path for the UK” would also affect forecasts, it warned.