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| Source: CSO |
The CSO reported today that Irish Consumer Prices in February,
as measured by the CPI, increased by 1.2% in the month. This compares to an
increase of 0.8% in February of last year. As a result, the annual rate of
inflation increased to 4.8%, up from 4.3% in January 2008.
The EU Harmonised Index of Consumer
Prices (HICP) rose by 1.2% in the month, compared to an increase of 0.9%in
February 2007. The annual rate of inflation, as measured by the HICP, increased
from 3.1% in January to 3.5% in February.
The most notable changes in the year were increases in Housing, Water, Electricity, Gas & Other Fuels
(+12.0%), Food & Non-Alcoholic
Beverages (+8.5%), Education (+5.9%) and Health (+5.7%). There
were decreases in Clothing & Footwear
(-3.3%) and Furnishings, Household Equipment & Routine Household
Maintenance (-1.5%).
The annual rate of inflation for
Services was 5.6% in February, while Goods increased by 3.9% in the year.
The most significant monthly price changes were increases in
Clothing & Footwear (+12.7%),
Furnishings, Household Equipment & Routine Household Maintenance (+2.8%), Food & Non-Alcoholic Beverages
(+1.8%), Health (+1.0%), Transport (+0.8%) and Housing, Water,
Electricity, Gas & Other Fuels (+0.7%).
The main factors contributing to the
monthly change were as follows:
-
Clothing & Footwear
and Furnishings, Household
Equipment & Routine Household Maintenance increased due to a recovery in prices following
the traditional January Sales.
-
Food & Non-Alcoholic
Beverages rose due to price increases in a wide range of products
including milk, meat, bread and cereals.
-
Health rose due to
an increase in doctors’ fees.
-
Transport rose due
to increases in airfares and motor taxation.
-
Housing, Water,
Electricity, Gas & Other Fuels rose due to increases in average mortgage
interest repayments and private rents.
The CPI excluding tobacco index for February was up 1.3% in the
month and up 4.8% in the year. The CPI excluding energy products index was up
1.5% since February and increased by 4.5%in the year. The CPI excluding mortgage
interest increased by 1.3% in the month and rose by 3.4% in the year.
Disappointing rise in February inflation - IBEC
IBEC, the business lobby group, today said that it was disappointing that inflation had increased in the month of February, following a number of months of falling rates. Today’s figures from the CSO show that the Consumer Price Index increased to 4.8% in February.
Commenting on the CSO data, IBEC Director of Policy, Danny McCoy said: "External factors such as record global commodity prices and further fallout from the international credit crunch are the main reasons for the increase. Food prices jumped by 1.8% in the month and are now up 8.5% in the year – this is a phenomenon that is being replicated around the world and it is impossible for Ireland to be immune from global commodity price trends."
"It is also very disappointing to see that mortgage interest rate costs increased by 1.3% in the month. It appears that the impact of the global credit crunch has meant that some banks raised their variable lending rates in recent months. The market still expects the ECB to cut interest rates in the second half of this year and that should bring welcome relief to householders.
"Unfortunately rising inflation is now a major challenge globally and Ireland’s harmonised index of inflation at 3.5% is about the same as the EU average. There are still a number of factors pointing to lower inflation rates as we move through 2008, however," he concluded.
Pat McArdle,
Chief Economist, Ulster Bank commented:
The February CPI
outcome was 4.8%, up from 4.3% in Jan and more than half a percentage point
above the consensus forecast of 4.2% - the UB expectation was 4.3%.
This outcome
reflected a very large bounce in food prices supplemented by a surprisingly
strong rebound in general prices following the Christmas sales. In addition, a
whole host of more minor items all rounded upwards instead of the usual mix of
up and down.
Food, accounts
for only 11% of the shopping basket but added 0.2% to the total CPI Feb figure
and a full 1% to the annual 4.8% rate. To get such a large impact, the
individual increases had to be striking. In Feb alone, the pint of milk was up
7.6%, cheese 3%, beef 3.5%, poultry 3%, bread 2% and breakfast cereals 4.3%. Not
surprisingly, the annual rates of food inflation are now quite racy. Flour is up
46%, milk 29%, bread 23% and eggs 20%. There is probably more to come though
there are some signs that global food price inflation may be levelling off.
The annual rate of increase in food and non-alcoholic
beverages was 8.5%, the highest since June 1984. All of the action
was in items formerly subject to the Groceries Order.
The rebound in
sales prices was also strong. Normally, sales prices fall in January and rise in
February. This time, the sales started earlier than usual in Dec, continued in
Jan with normal percentage falls but the February recovery was sufficiently
strong to offset both the Dec and Jan falls. This is surprising given that
retail sales, ex motors, were essentially flat in January. Perhaps the retailers
know better but one would not be surprised to see further weak sales in February
when we get the stats in a month’s time.
The next
category to catch the eye was restaurants and hotels where the usual February
rise in room prices occurred. However, this went against the trend of recent
months which had seen falls recorded. Apart from that, a number of minor items
posted rises that were slightly higher than usual. These included motor taxes,
which rose 9.5% following the Budget announcement, and air fares which rose by
29%, the biggest increase in four years. Mortgage interest rates also crept up
as banks passed on some of the higher cost of funds that has existed since the
credit crunch began last August.
One of the few
positives was provided by petrol and diesel prices. These fell by 2% to 3%
reflecting the state of play in early February. However, the March CPI will be
boosted by the sharp rise in petrol prices that has occurred in the meantime. We
now expect the March rate to remain around the 4.8% level. With no sign that
food or energy prices will fall back and the ECB reluctant to cut rates, our
average forecast for 2008 has been revised up to 3.7%, still a long way below
last year’s 4.9% average. The HICP rate rose from 3.1% to 3.5%, putting it, once
again, above the euro 3.2% rate.
