The rate of inflation is gathering pace driven by rising energy costs, according to data released yesterday by the Central Statistics Office. As measured by the Consumer Price Index (CPI), annual inflation jumped to 2.4 per cent in July, from 2.1 per cent in June, writes Marc Coleman, Economics Editor.
The overall inflation rate masks widely different performances for different goods and services.
Energy costs rose by 12.7 per cent in July, reflecting the knock-on effects of soaring oil prices which reached a historic high of $65 a barrel earlier this week.
When energy costs are excluded from CPI calculations, average prices rose annually by just 1.6 per cent.
A breakdown of inflation between goods and services sectors shows that the services sector also contributed disproportionately to inflation. Prices in that sector rose by 3.3 per cent in July.
Price increases in the restaurants and hotels category - which includes the prices of alcoholic beverages sold on premises - contributed strongly to this trend, as did price trends in health, education and transport.
The full impact of this on overall inflation was dampened by price falls in other categories.
Overall goods prices rose in July by only 0.8 per cent year on year and actually fell compared to June. Prices for clothing and footwear were significantly lower in July compared to June as a result of summer sales.
Pat Delaney, director of the Small Firms' Association (SFA), said further inflationary pressures were likely due to the combined effect of oil price rises and euro depreciation.
"The future effect of current increases in oil, petrol and energy costs will push our inflation rate higher . . . if US interest rates rise again we may see a weakening of the euro against the US dollar in coming months. This could result in 'bought-in' inflation."
According to Davy Stockbrokers, inflation will average 2.5 per cent over the whole year, compared with 2.2 per cent in 2004.
Fine Gael enterprise, trade and employment spokesman Phil Hogan blamed price increases on a lack of competition in the economy.
"Fine Gael is committed to setting up a single competition and regulatory authority to bring competition to these and other sectors. Future Irish competitiveness depends on a truly competitive environment and Fine Gael is determined to provide this," he said.
Labour Party consumer affairs spokeswoman Kathleen Lynch said rising heating costs would lead to a "winter of discontent".
Green Party finance spokesman Dan Boyle said the full impact of price increases had yet to be felt and that the economy was entering a critical period.
Earlier in the week the Consumer Sentiment Index - published jointly by the ESRI and Irish Intercontinental Bank - implied that rising energy costs were among the key factors leading to a fall in consumer confidence.