Rising transport and rent costs drive inflation upwards

CSO index shows prices increased by 0.7 per cent in year to June

Brian O’Driscoll arrives at Dublin airport yesterday following the British & Irish Lions Tour to Australia. The cost of transport increased by 0.6 per cent last month, driven by rising air fares. Photograph: INPHO/Donall Farmer.

Brian O’Driscoll arrives at Dublin airport yesterday following the British & Irish Lions Tour to Australia. The cost of transport increased by 0.6 per cent last month, driven by rising air fares. Photograph: INPHO/Donall Farmer.

Thu, Jul 11, 2013, 15:31

The rate of inflation rose in June as the price of transport, hotel accommodation and rent all increased.

The Central Statistics Office’s Consumer Price Index shows that headline inflation was 0.7 per cent in June, up from 0.4 per cent in the previous month.

Consumer prices last month were 0.7 per cent higher than at the same point in 2012, with education costs (+ 4.8 per cent) and alcohol and tobacco prices (+ 4. 4 per cent) the main drivers of the increase over the 12 month period. The index recorded a decrease of 0.2 per cent in June of last year.

The CSO said the cost of transport - specifically airfares - went up by 0.6 per cent in June. Hotel and restaurant prices - pushed by accommodation costs - increased by 0.5 per cent; and housing, water, electricity and fuel prices increased by 0.4 per cent, with rents, which were up 7 per cent year on year, said to be largely responsible.

“In line with recent trends the most significant price rises continue to be in areas impacted by increases in VAT and decreases in Government spending,” said Juliet Tennent, economist with Goodbody.

The CSO said traditional summer sales led to a drop in clothing and footwear prices (- 2.7 per cent), with the cost of furnishings, household equipment and maintenance also falling (- 0.5 per cent). The cost of household equipment and maintenance was

Alan McQuaid of Merrion Stockbrokers said domestic inflation was likely to remain depressed for some time to come.

“Continued weak consumer demand will in general put downward pressure on prices in the months ahead,” he said. “The austerity measures announced in Budget 2013, in particular the residential property tax, will again hit disposable incomes, which in turn will weigh negatively on spending power.”

He said the main inflation risks would likely be external matters such as the price of energy and food.

The annual rate of inflation for services was 1.6 per cent in the year to June, the CSO said. When mortgage interest repayments were excluded, service inflation was up by 2.6 per cent year on year. Goods costs decreased by 0.6 per cent in the same period.

Inflation is confined to the services sector which saw prices increase by 1.6% yoy in June while Goods remained in deflationary territory with prices falling by 0.6% yoy

Meanwhile, the EU Harmonised Index of Consumer Prices increased by 0.1 per cent in June. Prices, on average, were 0.7 per cent higher in June than a year earlier.

The EU rate was driven upwards by the rising cost of education (+ 4.8 per cent); housing, water, electricity, and fuel (+ 4.7per cent); and alcohol and tobacco (up 4.5 per cent).

Small business group Isme said Eurostat inflation figures showed Ireland to be the seventh most expensive country in the euro area. It urged the Government to address “the ever-increasing State imposed cost burden on business”.