A slice of consumers' earnings

Consumers spend a smaller slice of their earnings on food and drink than they did a decade ago - and it's not because the nation has discovered en masse the willpower required for a successful diet.

Disposable incomes have increased and - fun as it might be - we haven't blown it all on caviar and Dom Pérignon.

The most recent Central Statistics Office household budget survey - for 2004 to 2005 - showed that spending on food by households increased 21 per cent over the previous five years.

That might seem like a big jump, but overall spending by households leaped 36 per cent over the period, while disposable incomes increased 53 per cent.

The share of household budgets allocated to food has declined to 18.1 per cent of all weekly purchases, down from 22.7 per cent a decade earlier.

Although economists believe Irish consumers have yet to suffer the brunt of a global increase in dairy, grain and other raw material prices, food inflation is running at a 14-month high of 2.6 per cent. According to Bloxham stockbrokers economist Alan McQuaid, food prices now are "the big unknown" for the Republic's high inflation rate, which is currently 5 per cent.

Pricing wars among supermarkets in Britain (which are not great for Irish food exporters) actually dragged down Britain's most recent inflation figures, and it remains to be seen if that pattern will be repeated here.

Over the past five years, food prices have not gone up as quickly as the general rate of consumer price inflation, which is why food companies say they operate in a deflationary market.

But because everybody has to eat, any increase in food prices affects low-income households much more than higher earners.