Grocery price inflation in Ireland jumped to almost 5 per cent in July, nearly three times the rate of overall inflation.
The latest Consumer Price Index (CPI) showed headline inflation in the Irish economy dropped to 1.7 per cent in July, edging down from 1.8 per cent the previous month, as consumers benefited from cheaper clothes, air fares and transport fuels.
However, the figures show that food prices rose at a significantly faster pace, up 4.7 per cent year-on-year, as consumers paid more for a range of basic food items.
“Food and non-alcoholic beverages rose due to higher prices across a range of products such as meat, chocolate and confectionery and milk, cheese and eggs,” the Central Statistics Office (CSO) said, with analysts attributing this to higher agricultural commodity prices working through the supply chain.
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Prices – on a monthly basis – rose by 0.1 per cent in July having risen by 0.5 per cent the previous month.
“Heavy discounting in the clothing and footwear sector was the main driver of the slowdown in inflation in July,” said Thomas Pugh, chief economist at RSM Ireland. “Clothing and footwear prices dropped by 6.3 per cent in July alone, dragging the annual rate of inflation down to -2.4 per cent.”
The other notable annual change was for alcoholic beverages and tobacco, which rose by 3 per cent.
There were also increases in the cost of restaurants and hotels due to higher prices for alcoholic drinks and food consumed in licensed premises, restaurants and cafes.
Transport prices fell by 2.8 per cent on an annual basis “primarily due to lower prices for air fares, petrol and diesel”. Air Fares are now 12.2 per cent lower than this time last year, according to the CSO numbers.
The cost of housing, water, electricity, gas and other fuels increased primarily due to higher rents, and an increase in the cost of electricity, the CSO said. Within this category, private rents rose by 4.4 per cent while the cost of electricity rose by 2.4 per cent.
Excluding energy and unprocessed food, the underlying rate of inflation was 1.8 per cent in July.
“We still think that the risks are weighted towards inflation accelerating further, but the drag on growth from US tariffs will take the sting out of domestic inflationary pressures,” Mr Pugh said.
“As the new tariffs begin to squeeze margins, many Irish businesses may be left with little choice but to pass higher costs on to consumers, adding to inflationary pressures,” said Robert Purdue, head of dealing Ireland at Ebury.
