Irish inflation could top 13% in coming months, ‘driven by surge in energy prices’

Irish inflation could top 13 per cent in the coming months, intensifying the squeeze on households, stockbroker Davy has warned.

Reacting to the recent surge in wholesale gas prices, the firm’s chief economist Conall MacCoille said a headline rate “significantly above” 13 per cent was now a distinct possibility.

“The 35 per cent and 39 per cent price hikes announced by Irish energy company SSE Airtricity over the weekend are likely just the start of similar moves across the sector as the surge in wholesale prices is passed through to households,” he said.

“This will likely push Irish CPI [consumer price index] inflation well into double-digit territory in the second half of 2022, with a significant negative impact on the consumer. So the marginal pick-up in consumer and business confidence in July, signalled by the Bank of Ireland Economic Pulse survey, will be temporary.”

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Other suppliers are expected to follow SSE in announcing price increases in the coming days. As a result of the price hikes, the average (combined) gas and electricity bill in the Republic is now about €4,000.

Prices in the Republic rose an estimated 9.1 per cent in the year to July, according to the latest consumer price index compiled by the Central Statistics Office with energy, transport and food the main drivers.

Higher energy costs are expected to result in consumers cutting back on spending elsewhere, potentially slowing consumption, the main driver of economic growth. The Government is being urged to provide further direct support to households and businesses affected by spiralling energy costs in next month’s budget.

Investment bank Citi is predicting that UK inflation will hit 18.6 per cent in January — the highest in almost half a century — due to soaring wholesale gas prices. The Bank of England said this month that inflation would exceed 13 per cent towards the end of the year.