Annual inflation rate falls to 1.2%

Ireland’s inflation rate fell for a second month in October, helped by lower energy prices.

The annual inflation rate eased to 1.2 per cent in October, falling from 1.6 per cent recorded in September.

This is the lowest annualised rate recorded since November 2010. The rate of price hikes also eased month on month, with prices falling by 0.1 per cent last month compared with September. This compares to an increase of 0.3 per cent the same time last year.

The most notable changes in consumer prices in October, as measured by the consumer price index, were in transport, which declined 2.7 per cent, and education, where prices increased 4.6 per cent.

Fuel prices

Housing, water, electricity, gas and other fuel prices increased by 1.2 per cent.

The most significant changes in the year were increases in education (+6.7 per cent), transport (+5.8 per cent), and alcoholic beverages and tobacco (+3.5 per cent).

There were notable reductions in communications (-3.4 per cent) and housing, water, electricity, gas and other fuels (-3.3 per cent).

Energy remains the biggest contributor to the overall rate with an annual increase in motor fuels of 11.5 per cent, according to Goodbody Stockbrokers, although fuel prices did fall by 1.3 per cent month on month.

Household energy bills increased by 9 per cent annually.

The stockbroker also highlighted the rising costs of health and education, largely due to budgetary adjustments.

The cost of education rose 6.7 per cent on an annual basis, driven by a 6.5 per cent increase in third-level costs. Health insurance costs rose 16 per cent annually, also reflecting government policy in this area.

Domestic pricing pressures remain subdued, with the price of furnishings and household equipment, communications and recreation and culture experiencing annual declines. Consequently, inflation is still below the euro-area average.

The annual rate for services was 0.5 per cent in the year to October, while goods increased by 2.1 per cent. Services, excluding mortgage interest repayments, increased by 2.9 per cent in the year since October 2011, according to the figures.

The price index excluding tobacco for October fell by 0.1 per cent in the month and was up by 1 per cent in the year.

NCB economist Philip O’Sullivan said that while October’s decline in the rate of inflation was good news for households, this respite is unlikely to endure given hikes in transport and mortgage interest, which will put upward pressure on the rate over the coming months.