Drink price rise pushes up inflation

A rise in the price of a pint and increases in the cost of wine and spirits were the main factors behind a modest rise in the rate of inflation in October, according to figures published yesterday.

Irish inflation rose by 0.2 per cent in October and increased by 1.2 per cent in the 11 months since last November, as the strength of the economy and the pound's fall against sterling showed no signs of feeding through to consumer prices.

Analysts said the figures were in line with market expectations and suggested that intense competition among retailers still outweighed the weakening currency as an influence on Irish prices.

"The breakdown of the numbers suggests no evidence of a generalised acceleration in price pressures. Clearly, there are no signs of currency-induced increases in Irish prices," said Mr Austin Hughes, economist at Irish Intercontinental Bank.

Aside from the cost of alcohol, which increased by 1.5 per cent, price moves in most commodities were modest and cancelled one another out.

Transport prices fell by 0.4 per cent reflecting a decrease in the cost of motor fuel and a seasonal decline in other travel fares, notably air and sea travel, CSO statistician, Mr Stephen MacFeely said.

But this was offset by an increase in fees for post-graduate courses and the introduction of third-level registration fees which resulted in a 0.5 per cent increase in services and related expenditure.

The Government welcomed the figures, particularly Ireland's performance compared with other EU member-states, and said they provided further evidence of the continued strong performance of the Irish economy.

On an EU harmonised basis, prices rose by 0.1 per cent and increased by an estimated 0.8 per cent on last year.

Analysts said October inflation data for all EU member-states was not yet available but Ireland's rate was likely to be the lowest in Europe for the third month in a row. In September, Ireland boasted an inflation rate of 0.6 per cent, well below Austria which recorded the next best rate of 1.1 per cent and far below the EU average of 1.8 per cent.

"If you look at the EU harmonised index, at 0.8 per cent it's probably again going to be the lowest in Europe," said Mr Dermot O'Brien, economist at NCB Stockbrokers. `It's hard to imagine anybody else coming in lower when all of the October figures are around."

Mr O'Brien said there might be some upward pressure on inflation next year, reflecting a fall in the trade-weighted index but this should be offset by the impact of lower interest rates on mortgage payments.

Whether the Government decided to join European Economic and Monetary Union (EMU) at the pound's ERM central parity of 2.41 deutschmarks or higher would also be crucial for inflation, he said.

"It depends very much on what they do on the exchange rate and the entry rate. We're sticking with our view that there will be a revaluation, that they won't go in at DM2.41. "If that's the case, we would expect to see the inflation rate remain below 1.5 per cent next year."