Prices fall 0.1% as inflation turns negative in November

Tobacco, hotels and car insurance still on the rise

Prices fell marginally in November as the cost of household furnishings, food and clothing and footwear declined. The headline inflation figure was -0.1 per cent compared with a year earlier.

Among the biggest decreases were furnishings and household equipment, which fell 4.3 per cent over the year, and clothing and footwear, which saw a 2.8 per cent decline. This was partially offset by a rise in the cost of restaurants and hotels as accommodation and drinks prices rose, as did the price of health, motor and home insurance premiums.

But there were indications that the annual increase in motor insurance moderated during the month, rising 11.4 per cent year-on-year and 1 per cent compared with October’s prices.

An increase in excise duty on tobacco also hit cigarettes during the year.

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Averages prices measured by the EU Harmonised Index of Consumer Prices fell 0.2 per cent year-on-year, and 0.1 per cent month-on-month.

Analysts described overall inflationary pressures as “tame” and should remain well contained in the immediate future.

“Oil prices will be critical in determining the headline inflation outlook over the next 12 months or so, but they remain volatile and hard to predict given the uncertainty over potential Opec output cuts. Still, we think prices will be higher on average next year than in 2016,” said Merrion’s Alan McQuaid.

Wage demands

“However, the more immediate worry on the inflation front is likely to come with increased wage demands. The strong recovery in economic growth won’t help policymakers as more and more people will be looking for pay to be restored to pre-crisis levels, likely leading to over-aggressive demands on the remuneration front, which if granted, will do more damage than good in the long-run.

“Indeed, we have already seen this with public-sector workers. The last thing the economy needs now against the uncertain Brexit backdrop is to become uncompetitive again.”

Isme’s chief executive Neil McDonnell called for the Government to reduce costs. “By targeting Government-influenced costs in 2017, workers would have more money in their pocket. This is a more viable and credible option economically than increasing public sector pay. The former will benefit everyone, the latter will only benefit the one in seven who work for the State.”

Ciara O'Brien

Ciara O'Brien

Ciara O'Brien is an Irish Times business and technology journalist