Education, tobacco and transport push up inflation


CONSUMER PRICE INDEX:AN INCREASE in the cost of third-level education, transport and tobacco were the main drivers of a 1.7 per cent rise in inflation in the year to June, according to the latest consumer price index from the Central Statistics Office.

The figures shows that the average price of goods and services in Ireland was 1.7 per cent higher in June compared to June 2011.

This is slightly lower than the inflation rate of 1.8 per cent recorded in May and 1.9 per cent in April, suggesting a gradual stabilisation of Ireland’s inflationary trends over the last three months.

The cost of services rose 2.2 per cent on the year, while the rate of inflation for goods was 1.0 per cent.

A breakdown of the main contributors to the annual rise in inflation shows that the cost of education rose 9.4 per cent on the year – mainly due to higher third-level costs – transport costs were up 5.7 per cent, while the price of alcohol and tobacco rose 4.3 per cent, mainly reflecting an increase in the cost of tobacco.

Conversely, furniture, household equipment and maintenance costs were 2.5 per cent cheaper than in June 2011, the cost of recreational and cultural activities was 1.6 per cent lower, while communications costs fell 1.2 per cent.

On a monthly basis, prices were down 0.2 per cent, with energy cost and the price of footwear and clothing all falling.

However, transport costs rose 0.7 per cent between May and June due to higher air fares, while an increase in the price of hotel stays pushed the cost of hotels and restaurants up 0.7 per cent.

The EU harmonised index of consumer prices was 1.9 per cent higher in June compared with June 2011, in line with the previous month.

The rate of inflation rose in Ireland between 2005 and 2008, with inflation reaching a peak rate of 4.9 per cent in 2007.

The trend turned deflationary in 2009 and 2010, with the consumer price index falling by 4.5 per cent and 1.0 per cent in 2009 and 2010 respectively. However, inflationary trends resumed last year, with an annual inflation rate of 2.6 per cent recorded in 2011.

Merrion Stockbrokers noted yesterday that domestic inflationary pressures were likely to remain subdued for some time.

“Continued weak consumer demand will put downward pressure on prices in the coming months, as will lower interest rates, though the indirect tax changes announced in Budget 2012 will add to the consumer price index,” said economist Alan McQuaid.