Higher energy bills drove Irish inflation to 3.7 per cent in August, the highest level in four months.
The latest Consumer Price Index (CPI) comes amid another surge in global energy prices as the war in Iran grinds on with no end in sight.
The cost of housing, water, electricity, gas and other fuels, was the main driver, rising by 8.5 per cent year on year.
The category, which has the biggest weighting in the CPI’s index, accounted for 1.31 per cent of the headline 3.7 per cent figure.
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Electricity prices were shown to have risen by 8.1 per cent on this time last year, while the cost of home heating oil was up 44 per cent.
Private housing rents were up 4 per cent while mortgage interest repayments were up by over 10 per cent. With the European Central Bank lifting interest rates by a further quarter point on Thursday and markets pricing in at least one more rate hike between now and Christmas, mortgage interest repayments are likely to rise again.
Motorists are also being hit by higher transport costs with the cost of diesel and petrol up 15.1 per cent and 8.9 per cent respectively on this time last year.
Air fares were up by 14.4 per cent. The surge in transport costs reflect the increase in global oil prices which rose to over $100 (€86) a barrel this week on the back of further threats to shipping in the Middle East.
From kitchen counter to supermarket shelves, the rise of Ballymaloe Foods
Food and non-alcoholic drink price inflation, which economists had expected to surge after the start of the Iran war, remained muted at 0.1 per cent.
In response to the changed inflation outlook, the ECB lifted interest rates for second time in four months on Thursday while warning that conflict in the Middle East was continuing “to generate inflation pressures, and inflation is set to remain well above target for an extended period”.
“Irish inflation is heading the wrong way. At 3.7 per cent, it’s back to its early-year highs, and for the second month running not a single thing in the basket is cheaper than a year ago, something that didn’t happen even at the height of 2022’s rampant global inflation,” said Aaron Bright, investment analyst with financial firm IG.
“Home heating oil, rents, mortgage interest and now petrol are all biting at once, and with prices up 0.7 per cent in the month, it’s clear the cost-of-living squeeze is certainly not going away if this trend continues.”
Energy prices remain a key driver of Irish inflation and are likely to continue exerting pressure “as we head into the winter period”, Kate English, chief economist at Deloitte Ireland, said.
“While oil prices had eased somewhat earlier in the summer, developments in the Gulf region have seen this trend reverse. Only this week, oil prices have climbed back to levels last seen in May, at over $102 per barrel,” she said.
“In addition, European gas prices have surged to levels last recorded at the end of 2022. We also see upward pressure in other pricing metrics, such as freight indices.”
