Rent costs push up inflation in January, CSO figures show

Prices rose 0.2 per cent year on year but fell 0.7 per cent compared with December

Consumer goods prices on average were 0.2 per cent higher in January compared with January 2017, with notable changes in housing, electricity and gas prices, which rose by 3.7 per cent.

The price of a basket of consumer goods rose by 0.2 per cent in the 12 months to January, driven by higher rents, increased food and drink costs and a climb in the cost of hotel accommodation.

While prices are increasing, the annual rate of inflation halved compared with December and the consumer price index recorded the fourth month in a row of falling annual inflation rates.

Prices on average were 0.2 per cent higher in January compared with the same period in 2017 with notable changes in housing, electricity and gas prices, which increased by 3.7 per cent.

The figures released by the Central Statistics Office (CSO) show that alcoholic beverage and tobacco prices increased 2.8 per cent, restaurant and hotel prices went up 1.9 per cent and the costs associated with education increased by 1.6 per cent.

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More expensive home heating oil and electricity combined with higher rents caused the upward trend in the housing category while increased food and drink prices in restaurants and cafes helped pushed up prices in the restaurants and hotels category.

Factors that pulled back consumer prices in January included lower motor insurance premiums and a decline in prices for appliances, although that was partially offset by an increase in health insurance premiums.

Products such as meat, vegetables, jam, honey and bread also had a deflationary effect on the index.

January sales

On a monthly basis, prices dropped by 0.7 per cent compared with December, with January discounting in clothing and footwear having the biggest downward affect. Transport costs also fell on the month, primarily due to a decrease in air fares and a reduction in the price of cars.

In line with the yearly change, the price of alcoholic beverages had an inflationary impact on the monthly figures and rose by 0.17 per cent on December.

“The latest Irish consumer price index, released this morning, was slightly weaker than expected and continued to show that overall inflationary pressures in the economy still remain fairly -muted,” said Alan McQuaid, economist with Merrion stockbrokers.

“Despite strong Irish economic growth, there is little sign of sustained pressure on the prices front, which appears to be the same story across the euro zone, suggesting that the European Central Bank will be in no hurry to increase interest rates.

“Although the annual inflation rate should pick up in the coming months, inflationary pressures in Ireland as measured by the headline consumer price index are in general likely to stay well contained for the immediate future,” he added.

More immediately he noted concerns on the domestic inflation front centres on increased wage demand as the economy continues to grow strongly.

The consumer price index is designed to measure the change in the average level of prices paid for goods and services by all households in the country. About 51,000 prices are collected for a representative basket consisting of 615 items each month.

Peter Hamilton

Peter Hamilton

Peter Hamilton is a contributor to The Irish Times specialising in business