Consumer prices rise 0.4% for first half of year

Irish consumer prices rose by 0.4 per cent during the first six months of the year, according to new statistics from the Central Statistics Office (CSO).

Price increases were seen across a number of categories including education, alcohol, tobacco, restaurants and hotels.

According to the latest figures, education costs rose 4.5 per cent in the first half of 2014, while alcoholic beverages and tobacco prices increased by 4.1 per cent. The cost of miscellaneous goods and service was up 3.9 per cent while restaurants and hotels costs increased by 2.2 per cent.

During the six months to the end of June, communication costs declined by 3.4 per cent. There were also declines in the cost of clothing and footwear of 3.4 per cent; furnishings, household equipment and maintenance down 3.1 per cent and food and non-alcoholic beverages fell by 2.4 per cent.

In the month of June, consumer prices were 0.1 per cent higher on the back of increased costs for transport, alcohol and tobacco and restaurant and hotels.

Transport costs rose 1.7 per cent last month while prices for alcohol and tobacco increased by 0.8 per cent. Restaurant and hotel prices jumped by 0.5 per cent.

The Harmonised Index of Consumer Prices (HICP) rate, the measure used for EU comparative purposes, was up 0.2 per cent in the month and showed an annual increase of 0.5 per cent, as against 0.4 per cent in the two previous months.

“Inflationary pressures in general are set to remain well contained in the immediate future, and we see Ireland’s average headline inflation rate being below 1 per cent again in 2014,” said Alan McQuaid, chief economist at Merrion Capital.

“Following an average rate of just 0.5 per cent in 2013, we are now forecasting a figure of 0.4 per cent for this year, with the risks still tilted to the downside,” he added.

Davy economist David McNamara said that at face value, the data suggest that price pressures remain very weak in the economy. However, stripping out ECB rate cuts shows annual inflation rising to 1 per cent over the month, while services price inflation ticked up to 3.3 per cent from 3.1 per cent.

“The immediate outlook is for further modest increases in inflation. We would expect price pressures in the domestic services sector to gather pace as the economy recovers, but overall inflation will be weighed down by goods price declines and rock-bottom ECB rates,” he said.

Lobby group ISME said the low inflation rate concealed high business costs and called on the Government to do more for small and medium-sized businesses.

The organisation reiterated its warning on union calls for wage increases, saying that SMEs are still struggling with high costs and low consumer demand.