Irish inflation eases to 7.8% in January but energy and food costs remain high

Headline inflation in the Irish economy continued to cool in January with prices rising at an annual rate of 7.8 per cent, down from 8.2 per cent the previous month, according to figures released by the Central Statistics Office (CSO).

The CSO’s latest consumer price index — which measures a basket of goods and services — has now fallen for three consecutive months, fuelling hopes that the current period of price rises may have peaked.

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Nonetheless, the annual rate of price growth (at 7.8 per cent) was still near a 40-year high and almost four times the European Central Bank’s (ECB) target rate of 2 per cent, placing significant financial strain on households.

Mortgage holders are also bracing for another interest rate increase from the ECB next month, the sixth since July last year.

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The CSO noted that January was the 16th straight month where the annual increase in prices has been at least 5 per cent. The main drivers of higher living costs in the year to January were housing, energy and food.

The cost of housing, water, electricity, gas and other fuels rose by more than 26 per cent. Within this category, the cost of privately rented accommodation was up by 10.4 per cent on this time last year. Electricity prices were up 62.7 per cent on a 12-month basis, while gas prices rose by a whopping 86.3 per cent.

The cost of food and non-alcoholic beverages was also up, rising by 12.8 per cent on January last year. Prices across a range of products rose with milk up by 30.6 per cent, sugar (+26 per cent), butter (+22.9 per cent), eggs (+22.3 per cent) and poultry (+19.5 per cent) compared with January 2022.

Core inflation, which strips out energy and food prices, stood at 5 per cent.

On a monthly basis, the CSO’s figures show consumer prices fell by 0.8 per cent between December and January, providing further evidence that the current price surge is moderating. The biggest drivers of the monthly change were reductions in clothing and footwear (-6.4 per cent), a reflection of the January sales, and transport (-2.9 per cent). Transport fell primarily due to lower prices for airfares, said the CSO.

Marian Ryan from consumer advocacy group Taxback.com said: “The latest CSO figures thankfully show that inflation continues on its downward trajectory, with inflation easing off in January, at 7.8 per cent. However, inflation is still incredibly high and a huge burden on many households and businesses.

“Taxback.com is reiterating its call on the Government to extend the reduced 9 per cent VAT rate on energy bills and on the hospitality sector beyond February 28th. It is also calling on the Government to extend the current excise duty reductions on petrol and diesel beyond February 28th too.”

She added: “Otherwise, from March 1st, consumers and businesses will face higher energy bills, higher prices at the petrol pump — as well as more expensive hotel stays, hotel and restaurant meals, hairdressing, and trips to cinemas and theatres.”