New figures show cost of living rising

THE COST of living rose in February at the fastest pace in almost three years, with higher health insurance premiums and the end of season sales drivers of the increase. The annual inflation rate in February reached 2.2 per cent.

New figures from the Central Statistics Office show the monthly rate of inflation swung from -0.2 per cent in January to 0.9 per cent per cent last month. This compared with a 0.4 per cent increase in the same month of last year, but is a reversion to pre-crisis patterns – in the five years to 2008, the average month-on-month increase in the price level in February was just over 0.9 per cent.

Analysts at Ulster Bank said the overall growth in February this year was “notable” because of its broad basis. They welcomed the relative weakness of Irish inflation when compared to that of competitors, but acknowledged it still represented “an additional headwind for the Irish consumer”.

Of the 12 sub-indices that comprise the overall inflation index, seven recorded an increase last month.

Outside the sales-related clothing and footwear price growth of 6.5 per cent, the largest contributor to the rise was “miscellaneous goods and services”, which included a 14.4 per cent rise in health insurance premiums.

Food and transport prices also helped to push up the monthly rate.

A breakdown of inflation drivers shows that a number of individual food categories posted sharp monthly increases: preserves were up 15.3 per cent; butter rose by 3.8 per cent; fruit juices rose by 3.5 per cent. Air travel costs were up by 21 per cent between January and February, while general “transport services” rose by 4.6 per cent.

The annual rate of inflation now stands at 2.2 per cent, which compares with 1.7 per cent in January and -3.2 per cent a year ago. On an annual basis, inflation has now been positive for the past seven months, having been negative since the start of 2009.

Business group Ibec yesterday said the annual February increase had been expected and was largely driven by “external factors”. Economist Reetta Suonperä predicted that the annual rate would average 2 per cent this year, taking account of the interest rate hikes that have been flagged by the European Central Bank. She said prices for commodities such as oil, while contributing to inflation, could quickly fall if the political situation in the Middle East stabilised.

The CSO said the biggest contributor to the annual inflation rate was the housing and fuel category, where prices rose by 9.5 per cent. Within this category, liquid fuel prices rose by 37.3 per cent.