Irish inflation moderates to 8.7% amid worst cost-of-living squeeze in decades

Irish inflation moderated to 8.7 per cent in August, down from an annual increase of 9.1 per cent in the previous month. This was the first fall in headline price growth seen in the economy for seven months.

Prices have been rising on an annual basis since April last year and inflation has been above 5 per cent for 11 straight months, triggering the worst cost-of-living squeeze in decades. The latest figures from the Central Statistics Office (CSO) show consumer prices are being driven by a combination of rising energy, transport and food costs.

The most significant increases in the year were in the housing, water, electricity, gas and other fuels category with prices up 20.3 per cent. Within this category, electricity costs were up 38.1 per cent on an annual basis in August, while natural gas prices rose by 56 per cent. Home heating oil was up by 72.9 per cent year on year.

Energy companies have announced price hikes in recent days in response to another surge in wholesale gas prices, suggesting the slowdown in headline inflation may be temporary.

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Transport costs were also up by almost 15 per cent year on year.

The CSO said the annual change in transport costs reflects a rise in the cost of diesel (+34.6 per cent), petrol (+23.5 per cent), purchase of motor cars (+11.3 per cent) and airfares (+34.2 per cent) compared to August 2021.

Food and non-alcoholic beverages, the other big category driving the price squeeze, rose by 8.8 per cent due to higher prices across a range of products such as meat, bread, cereals, milk, cheese and eggs.

In the year to July, there were price increases in an 800g loaf of white sliced pan (up 23 cent), two litres of full fat milk (up 36 cent) and a pound of butter (up 58 cent).

On a monthly basis, the latest figures show consumer prices rose by just 0.2 per cent in August, one of the more moderate monthly increases. The slowdown in headline price growth in the State coincides with a moderation in price growth across the Organisation for Economic Co-operation and Development (OECD), offering hope that the current price surge may be cooling. The latest OECD figures indicate year-on-year inflation across the industrialised bloc hit 10.2 per cent in July, down from a 34-year high of 10.3 per cent in June.