Annual rate of inflation slips back in June

The annual rate of inflation fell to 4.9 per cent in June, down from a rate of 5 per cent the previous month, according to the Central Statistics Office (CSO).

The consumer price index (CPI) increased by 0.2 per cent last month.

This was lower than the rise in prices the previous June, and so the annual rate of inflation was pushed down.

Economist had expected it to stay at 5 per cent.

Ulster Bank chief economist Pat McArdle said that the figures added to his view that inflation peaked at 5.2 per cent in January.

Another slight dip is anticipated next month, but inflation is expected to average at 5 per cent in 2007.

A widely forecast increase in the European Central Bank (ECB) key interest rate in September will put pressure on the rate later this year, while economists also warned yesterday that global factors such as surging oil prices and rising food costs could also keep inflation high.

Goodbody Stockbrokers said there were "conflicting signals" from the latest figures.

The annual rate of inflation when measured by the Harmonised Index of Consumer Prices (HICP) increased last month, climbing to 2.8 per cent in June, up from 2.7 per cent in May.

The HICP excludes mortgage interest and some other items, and is the standard by which inflation is measured in the EU.

The average rate in the euro zone is 1.9 per cent, more than one percentage point lower than in the Republic.

Mr McArdle said the increase in tobacco taxes introduced in last December's Budget accounted for 0.4 per cent of the higher HICP rate here.

Price increases in transport, restaurants and hotels, housing, water, electricity, gas and other fuels categories were the highest in June.

The cost of clothing and footwear fell by 1.7 per cent last month as there was an early start to the summer sales.

Clothing and footwear prices have now fallen 3.7 per cent in the past 12 months.

Food prices rose by 0.4 per cent last month, and have gone up by 2.5 per cent over the past 12 months.

Mr McArdle said price rises in the restaurants and hotels sector were "surprisingly subdued".

"It would appear that the more subdued economic outlook, plus the increasing tendency for the Irish to holiday abroad, may be having an impact," he said.

Bloxham economist Alan McQuaid said it was wrong to say that if volatile items such as mortgage interest and energy were excluded, the news on inflation was much more positive.

"You cannot tell hard-pressed workers and pensioners that, excluding volatile items, everything is rosy on the prices front. It just doesn't work that way."