Inflation rate of 2.9% for year to date

CONSUMER PRICES rose by 2.9 per cent in the year to November, new data from the Central Statistics Office showed.

However, consumer prices remained static compared with October, with higher prices for clothes and training offset by falls in the cost of accommodation in Ireland.

The annual rate of inflation is just below the euro area average, which is estimated at 3 per cent in the year to November.

Most of the pressure on prices is coming from sources outside Ireland, with energy prices showing a 14 per cent rise year on year.

Mortgage interest, meanwhile, was 18 per cent higher over the year.

However, Goodbody economist Juliet Tennant noted that recent changes to mortgage interest, including yesterday’s decision by the ECB to cut rates to 1 per cent, could have an impact on December’s figures.

On the domestic side of things, the cost of education was up, rising almost 9 per cent, while transport costs were 3.7 per cent higher.

These rises were partly offset by a fall in furnishings and household equipment, which saw costs fall by 1.9 per cent. Restaurants and hotels were 0.9 per cent lower as accommodation costs fell.

In the year to November, the rate of inflation for services was 4.2 per cent.

On a monthly basis, consumer prices were unchanged from October.

Education prices were 2.1 per cent higher over the month, while clothing cost 1.5 per cent more. The cost of alcohol, restaurants and hotels were lower, however, with off-licences and supermarkets charging lower prices for wine and spirits.

Analysts were gloomy about prospects, particularly with the 2 per cent VAT increase announced in the budget due to come into effect in January.

With employment growth not expected until well into next year and further fiscal consolidation weighing on disposable incomes, domestic inflationary pressures are likely to remain subdued for some time to come, Bloxham’s chief economist, Alan McQuaid, said.

Continued weak consumer demand will put downward pressure on prices, though the indirect tax changes announced in Budget 2012 will add to the CPI.

The EU Harmonised Index of Consumer Prices, which excludes items such as mortgage interest, was also unchanged in the month, but prices were 1.7 per cent higher compared to a year earlier.