Consumer prices remain unchanged in December

Ireland’s annual inflation rate hit 0.5% in middle of last year but falling fuel costs and lower car prices dragged it lower

Consumer prices remained unchanged in December following several months of decline, resulting in a zero rate of annual inflation, the weakest in the euro area.

Ireland’s annual inflation rate had hit 0.5 per cent in the middle of last year – its highest level in three years – but falling fuel costs and lower car prices have dragged it back since.

The current Brexit-related weakness in sterling may also be playing a role. A weaker pound keeps import prices down.

According to the latest Consumer Price Index, the most notable changes in the year were decreases in household furnishings (-4.8 per cent), clothing and footwear (-3.8 per cent) and food and non-alcoholic beverages (-2.8 per cent).

Conversely, there were increases in the price of miscellaneous goods and services (including motor insurance) which rose 2.2 per cent. Within this category the cost of motor insurance rose 9 per cent on an annual basis.

There were also increases in restaurant and hotel prices (+1.9 per cent), alcoholic beverages and tobacco (+1.8 per cent) and education (+1.8 per cent).

The Irish Small and Medium Enterprises Association said despite the overall rate there were sharp increases in certain areas.

“Our latest research shows that 30 per cent of our members have experienced inflationary pressures of over 6 per cent in transport costs, while a further 67 per cent have experienced over 6 per cent increases to their insurance premiums,” said chief executive Neil McDonnell.

The euro-area inflation rate almost doubled in December to 1.1 per cent, the strongest since 2013, but this is still well below the goal of just under 2 per cent. Core price growth, excluding energy and food, only edged up to 0.9 per cent from 0.8 per cent, however.

A surge in headline inflation last month in Germany, Europe’s largest economy, sparked a media outcry and calls for Frankfurt to pull back on its stimulus.