THE ANNUAL rate of inflation fell to 4.3 per cent in April from 5.0 per cent in March, according to the Consumer Price Index published yesterday by the Central Statistics Office (CSO).
Rising food prices have been a major contributor to recent inflation. However, the CSO’s April price survey found that, on average, food prices stood still in April. Along with a steep decline in airfares, static food prices assisted in containing the average increase in consumer prices during the month of April to just 0.1 per cent.
This represents a steep fall in the inflation rate of 0.8 per cent recorded in April 2007. The decline in the April inflation rate is the proximate cause of the deceleration in the annual inflation rate to 4.3 per cent. Excluding mortgage interest, the rate of inflation in the year to April, as measured by the Harmonised Index of Consumer Prices (HICP), slowed to 3.3 per cent from 3.7 per cent in the year to March 2008.
Inflation in Ireland now mirrors the euro-zone average. The Irish HICP inflation rate for the year to March, at 3.7 per cent, is broadly comparable to the 3.6 per cent average inflation rate in the euro area over the same period.
With national pay talks in progress, and the rate of inflation a key influence on wage demands, monthly price trends are being carefully monitored by employers and unions. The deceleration in inflation during April was welcomed yesterday by Dr Danny McCoy, director of policy at employers’ organisation Ibec.
“The April trend is positive, but we fully expect inflation to be much lower in the second half of the year,” he said.
“However, even though inflation is coming down, the price level in Ireland remains high relative to other countries and competitiveness is still a major problem.”
Expectations are different on the other side of the bargaining table, where Paul Sweeney, economic adviser to the Irish Congress of Trade Unions, sits.
“We are not sanguine about any further reductions in inflation. We still think that commodity prices are sticky at current high levels, oil prices are up and interbank interest rates are rising. The full effects of these trends have yet to feed into Irish consumer prices.
“The April inflation figures will have no impact on the outcome of the pay talks,” said Mr Sweeney.
There has been a shift in the composition of inflation in the past year. Irish consumers distribute their spending almost equally between goods and services. In the year to April 2007, consumer prices were rising at an annual average rate of 5.1 per cent. Services were responsible for generating almost all inflation. The price of goods was barely rising.
A year later, the rate of services inflation has almost halved, while the pace of price increases for goods has risen close on tenfold.
What’s up and what’s down: page 3
