Sunday 25 June 2017

Prices still falling, but mortgages and fuel rise sharply

Aideen Sheehan Consumer Correspondent

RISING interest rates and higher petrol prices are pushing up the cost of living, according to new figures. However, overall, prices are still 2.1pc lower than a year ago.

Latest inflation figures from the Central Statistics Office show that prices rose by 0.2pc in April. For the first time in two years, prices have gone up three months in a row.

On an annual basis, the cost of living is now falling at its slowest rate since February 2009.

The yearly inflation rate now stands at -2.1pc. This compares with -3.1pc in March and -6.6pc at its lowest point last October.

Ireland remains one of just three European Union countries that are continuing to see annual price deflation.

Analysts predict that weak domestic spending will result in overall prices dropping between 1.25pc and 1.5pc this year.

Davy Stockbrokers noted that the domestic economy was experiencing no price inflation, apart from energy prices and mortgage rates.

By contrast, clothes prices are down 11pc in the past year, food is down 7pc and prices for furniture and household items have dropped by almost 5pc.

However, mortgage interest repayments rose by 3pc in April.

Motorists are also feeling the pinch at the pumps, with petrol and diesel prices rising by a massive 24pc.

Opposition TDs last night accused lenders of heaping extra pressure on mortgage holders, despite the European Central Bank leaving the base rate unchanged at 1pc for the past 12 months.

"Banks are tightening the squeeze on hard-pressed homeowners by hiking interest rates on mortgage repayments," said Fine Gael TD Kieran O'Donnell.

"Banks should be reducing their own cost bases, not targeting families and individuals whose backs are against the wall."

The Irish Small and Medium Enterprises Association (ISME) urged the Government not to miss the opportunity to improve Irish competitiveness presented by 16 months of falling prices.

"Unfortunately, the Government seem to have missed this message by allowing increases in energy, transport and local charges," said ISME analyst Jim Curran.

He added: "A prime example is the recent decision to allow a carbon tax on gas, which will result in a 6pc cost increase to business."

The price gap between Ireland and the rest of Europe has continued to narrow. The separate HICP index shows European prices up 1.5pc in the past year and Irish ones down by 2.5pc, according to Goodbody stockbrokers.

"As such, progress in addressing the price gap versus Europe continues to be made and we estimate that the differential has been narrowed by 6pc thus far," Goodbody economist Deirdre Ryan said.

Bloxham stockbrokers warned that while Ireland needed to cut wages and prices to become more competitive, there was a danger of a "deflationary spiral", such as had been experienced by Japan.

Irish Independent

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