Even a passing glance at the latest inflation data from the Central Statistics Office (CSO) is likely to leave consumers scratching their heads in confusion and – in many cases – disbelief.
There will be people wondering why, if the rate of inflation is now half what it was this time last year, there has been little or no easing in the cost of living crisis they are forced to confront every day.
In fact, for many people with home loans things are actually getting considerably worse with this week’s interest rate hike rolled out by the European Central Bank – the ninth in less than a year – set to cost tens of thousands of homeowners hundreds of euro over the next 12 months.
According to the Harmonised Index of Consumer Prices (HICP), the measure used to draw pricing comparisons with other EU countries, inflation in Ireland was running at an estimated 4.6 per cent in the 12 months to July.
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This time last month the increase was 4.8 per cent and this time last year the same index was suggesting inflation was running at 9.6 per cent as energy prices went through the roof and supermarkets imposed savage price hikes at every turn of the trolley.
According to the HICP, energy prices fell by 3.1 per cent in May. This figure alone is likely to come as a shock to many energy customers who have seen no such fall in their bills.
In fact, despite a dramatic decline in the cost of energy on wholesale markets since the start of the year, domestic bills have remained stubbornly high with only Pinergy passing on any price cuts in recent months.
All the other energy providers – the companies that make up the vast majority of the Irish market – have persistently claimed that their prices remain high because of their practice of buying energy up to 18 months in advance to ensure supply. Such claims are sounding increasingly hollow to hard pressed consumers and demands for price cuts are likely to grow much louder as the winter approaches.
[ Irish prices for goods and services up 4.6% over past yearOpens in new window ]
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Food prices are also alarmingly high and according to the latest data costs increased by 0.4 per cent over the past month and by 12.5 per cent since this time last year.
While there has been some downward movement on the price of some products in supermarkets in recent months, the annual cost of grocery shopping for many households is still over €1,000 what it was in 2020 and much more will have to happen if consumers are to see any benefit from lower input costs for supermarkets and their suppliers.
While the downward trajectory of the top line figures are at least a cause for optimism, the core or underlying inflation – the measure which excludes volatile items like food and energy – is a cause for concern.
According to the data, it is currently at 5 per cent and it is this underlying price growth that has been occupying the minds of policymakers in the ECB who remain concerned that the initial price surge sparked by Russia’s invasion of Ukraine in early 2022 has become embedded across the wider economy and may be driving higher wage demands.
Inflation is still well above the ECB’s 2 per cent target and the bank has lifted interest rates by a combined 4.25 basis points since last July to arrest runaway price growth. It has warned it will keep raising interest rates as long as core inflation is rising and ultimately we will all pay the price for that.