AMSTERDAM: Consumer prices have begun to rise again even though the State’s annual inflation rate remains negative.
The latest Consumer Price Index (CPI) suggests prices rose by 0.3 per cent in June on the back of price hikes in transport, hotels and restaurants.
However, the annualised rate of inflation remains at -0.1 per cent. The State’s headline inflation rate has been negative for the past seven months.
The latest figures will ease fears that Ireland’s recovery may yet be hampered by a bout of deflation, which encourages consumers to defer spending.
The primary drivers of negative inflation were annual decreases in clothing and footwear (-3 per cent), transport (-2.5 per cent) and food and non-alcoholic beverages (-2.2 per cent).
Conversely, there were increases in education (5 per cent), communications (2.1 per cent), housing, water, electricity, gas and other fuels (1.5 per cent), and restaurants and hotels (1.7 per cent).
“Despite the strong recovering economy, domestic inflationary pressures in Ireland are in our view likely to remain fairly well contained in the immediate future,” Merrion economist Alan McQuaid said.
“That said, we do expect some pick-up in the second half of 2015 due to base effects related to oil prices, which fell sharply in the second half of 2014, a gradual rise in wages, and the lower euro pushing up import costs,” he said.
“ With prices falling into negative territory, the danger was that deflation became entrenched, though we don’t see this as an issue here in Ireland,” he added.
The Irish Small and Medium Enterprises Association (Isme) said business indicators were pointing to “a gradual and fragile recovery” across the country.
“ True to form the trade unions are first out of the blocks looking for wage increases, which is to be expected – that’s what they do. However, in a pre-election year, the unions are being aided and abetted by politicians, hell bent on re-election. Is it too much to ask for ‘political leadership’, or is the economy consigned to more ‘boom and bust’ years?” Isme chief executive Mark Fielding said.
