Rising food prices push inflation up

SOARING FOOD prices led to a sharp rebound in inflation last month and pushed the Republic's "misery index" to 10 per cent for the first time in a decade, writes Laura Slatteryand Martin Wall.

Consumers' food bills are now increasing at an annual rate of 8.5 per cent, with the cost of milk 29 per cent higher and bread 23 per cent more expensive than it was a year ago, according to new figures from the Central Statistics Office.

A 1.8 per cent climb in food prices in February alone has forced the annual rate of inflation back up to 4.8 per cent, rising from 4.3 per cent in January, the consumer price index shows.

Adding the 4.8 per cent inflation rate to February's 5.2 per cent unemployment rate takes the so- called misery index to 10 per cent, according to Fine Gael finance spokesman Richard Bruton, who accused Minister for Finance Brian Cowen of "sloppy economic management".

More gloom for consumers is expected, with economist forecasting further hikes in the price of food, while the fall in petrol and diesel costs in February has already proved temporary, with petrol pump prices rising steeply in March.

Deirdre Ryan, economist at Goodbody Stockbrokers, said: "The still elevated level of global commodity prices suggests there is more to come on this front in the months ahead."

Food prices have spiked because of the surging demand for dairy produce from China and other growing Asian economies, which has depleted grain supplies.

Trade unions warned yesterday that living standards would have to be protected in the national pay talks, which are due to begin soon.

Siptu, the State's largest trade union, described the renewed rise in inflation as "extremely worrying", while Irish Congress of Trade Unions economic adviser Paul Sweeney said there was no doubt that the rising rate of inflation was eroding people's living standards.

"Food and fuel products account for 20 per cent of average consumer spending and these price rises impact disproportionately on those on lower incomes. People simply do not have the capacity to absorb these continued and continuing increases, month after month. There are only so many cutbacks a family budget can take."

Mr Sweeney said that slight falls in the inflation rate, in December and January, had led to "some extraordinary outbursts of irrational exuberance, as employers and 'stockbroker economists' all happily chorused that inflation had now peaked".

"In their enthusiasm, they all seemed to ignore the serious inflationary pressures that exist at home and in the global economy, as our research showed.An element of complacency seems to have entered the calculations - inflation has been on a consistent upward trajectory for a number of years now."

Siptu general secretary Joe O'Flynn pointed to the 5.7 per cent annual rise in health costs, which is the fastest pace of increase in the sector in more than two years. Doctors' fees increased 5.3 per cent in February and are now 9.1 per cent higher than they were 12 months ago.

Clothing and footwear prices increased 12.7 per cent last month, signalling an abrupt end of the winter sales, but on an annual basis, clothes and shoe prices have fallen 3.3. per cent.

The EU harmonised index of consumer prices rose to an annual rate of 3.5 per cent last month, up from 3.1 per cent in January. This compares to a euro-zone average of 3.2 per cent.