Transport costs push inflation to four-year high of 0.9 per cent

Irish inflation has risen to nearly 1 per cent, its highest level in four years, on foot of rising transport costs.

The latest consumer price index suggests the average basket of goods and services was 0.9 per cent higher in April than 12 months previously. The last time inflation exceeded this level was February 2013, when it was 1.1 per cent.

The most notable change in the year was a 7.2 per cent hike in transport costs. This was mainly due to an increase in air fares as well as higher petrol and diesel prices, which was partially offset by a reduction in the price of vehicles.

The figures show the price of diesel has risen 13.8 per cent in the past year, while the price of petrol is up 9 per cent.

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There were also price rises in health (+2.2 per cent), restaurants and hotels (+2 per cent) and miscellaneous goods and services, which includes health insurance (+1.7 per cent).

Prices in restaurants and hotels increased primarily due to higher prices for alcoholic drinks and food consumed in licensed premises and an increase in the cost of hotel accommodation, the CSO said.

During the same period there were decreases in the average price of furnishings and household equipment (-4.9 per cent), clothing and footwear (-4.3 per cent), and food and nonalcoholic beverages (-2.7 per cent).

Under control

Merrion analyst Alan McQuaid said despite the rise in annual inflation, overall inflationary pressures were still well-contained.

“Despite strong Irish economic growth and signs that things may have bottomed on the prices front, inflationary pressures as measured by the headline consumer price index should in our view remain fairly well-contained in the immediate future,” he said, while noting the cost of services such as insurance and education remain elevated.

He said oil prices would be critical in determining the headline inflation outlook over the next 12 months or so, but they remain volatile and hard to predict given the uncertainty over potential Opec output cuts.

“Even allowing for the up-and-down start to 2017, we still think prices will be higher on average this year than in 2016,” he said.

Mr McQuaid said “the more immediate worry” on the inflation front was likely to come with increased wage demands. “Indeed, we have already seen this with public-sector workers. And extra pay for public servants will mean less money being spent on vital services,” he said. “ The last thing the economy needs now against the uncertain Brexit backdrop is to become uncompetitive again through higher wage costs,” he said.