Budgets tighten as annual rate of inflation hits 3%

HOUSEHOLD BUDGETS face a tighter squeeze following another sharp increase in consumer prices in March, new figures from the Central Statistics Office show.

The annual rate of inflation is now 3 per cent, the CSO said, after a 0.9 per cent jump in prices last month. Increases in the cost of mortgage interest accounted for almost half of the monthly rise in the CSO’s Consumer Price Index.

Mortgage interest costs rose 6.9 per cent last month and are up almost 29 per cent on an annual basis. Yesterday’s interest rate rise by the European Central Bank will drive this cost even higher for borrowers in the months ahead.

The Irish Congress of Trade Unions said inflation was “placing unsustainable pressure on working people and households” and the ECB move would result in additional hardship.

“There is a limit to the burden of austerity that any society, or household, can tolerate,” said its economic adviser Paul Sweeney.

The 3 per cent annual rate of inflation compares to a rate of 2.2 per cent the previous month.

The rise in prices in March, which comes on top of a similar increase in February, was also due to higher fuel, insurance and clothing costs.

Higher global oil prices led to a 3.2 per cent monthly rise in the cost of petrol and a 4.7 per cent increase in diesel. The cost of transport as a whole is up 3.4 per cent compared to a year ago.

Sustained upward pressure on global commodity markets was also reflected in a 1.6 per cent year-on-year rise in food prices.

Spiralling health insurance premiums have also pushed up Ireland’s inflation rate, with costs up 3.1 per cent monthly and more than 20 per cent annually.

Clothing and footwear prices rebounded 4 per cent in March as the effects of the winter sales wore off. However, the cost of alcohol fell last month as a result of lower prices for beer, wine and spirits in supermarkets and off-licences.

Small business group Isme described the figures as “shocking”, and said little Government action had been taken to address costs.

“There is no doubt that significant cost increases, including local charges, particularly commercial rates, rents, energy and transport, continue to take their toll and undermine already struggling businesses,” said Isme chief executive Mark Fielding.

The jump in inflation means the pace of improvement in Ireland’s competitiveness is slowing down, said Ulster Bank economist Lynsey Clemenger.

The Harmonised Index of Consumer Prices (HICP), the EU-wide measure of inflation, rose 0.5 per cent during the month and is up 1.2 per cent annually. This compares to a euro zone HICP average of 2.6 per cent, above the ECB target of 2 per cent. A year ago, Ireland’s HICP rate was -2.4 per cent compared to a euro average of 1.6 per cent. “Ireland’s HICP inflation rate remains lower than in the euro area, but the pace of improvement is moderating,” said Ms Clemenger