Experts warn surging costs 'threaten to kill off Tiger'
RISING costs could "kill the Celtic Tiger", as the latest slight drop in inflation could be wiped out by rising mortgage, rent and petrol prices.
The new Consumer Price Index shows that prices rose by 0.8pc last month, although inflation fell to 4.8pc, down from its 5.2pc peak in January.
Analysts are divided on what will happen next, but even Social Affairs Minister Seamus Brennan warned that the services sector inflation of 9.1pc was "a cause for concern".
The Government was on target to meet its aim of 4.1pc inflation for the year but there was "no room for complacency", he said.
The Central Statistics Office figures show that services are driving inflation whereas the prices of goods - most of them imported and subject to global competition - remained unchanged in the year.
Price rises in February were the highest in 10 months, and house-price rises and utility costs of 22.5pc were the most notable changes in the past year.
Within the EU, only Greece and a handful of accession states now have higher inflation than Ireland.
Rents alone have risen almost 10pc in the past year - and by 2.6pc last month, which commentators said was because more people are being priced out of buying property.
Mortgage repayments have soar by a staggering 48pc in the last year, and the Green Party warned that, with a interest rate hike due next month, the pain is far from over.
Small business group ISME said that increasing costs were causing multinational companies to "sprint from our shores".
These costs "will eventually kill the Celtic Tiger" unless drastic action is taken on Government-controlled costs like utility bills and public sector pay, said ISME Chief Mark Fielding.
Prices could rise slightly this month because of rising oil prices, but a downward trend is likely after that, predicted IIB Bank Chief Economist Austin Hughes.
Overall, the inflation rate had sunk in nine out of 12 categories, with a "particularly striking" drop in food price inflation to 1.1pc, while petrol and energy prices had also fallen.
"We think some of the recent concerns in relation to Irish inflation have been exaggerated to the point where they could damage consumer and business confidence," Mr Hughes said. "This is not to say that we can be complacent about Irish cost trends," he said, predicting 4pc inflation this year.
The price of clothes and shoes rose 11pc last month as the January sales ended, but are nearly 3pc lower than last year. And while food prices rose modestly in the past year, the cost of fresh produce such as beef, fruit and fish rose much more steeply.
Health costs only rose 2.9pc in the past year and complementary medicine is not proving a cheaper choice, as prices rose 7pc.
Young families are bearing the brunt of inflation because they spend over half their budget on costs including mortgage, childcare, education, health insurance and fuel - which means their cost of living has risen by 15pc, said Fine Gael finance spokesman Richard Bruton.
And in recent days the price of petrol and diesel has started to soar again, Labour TD Tommy Broughan said.
The steady closure of petrol stations by owners cashing in on the property boom meant consumers could be held to ransom by oil companies, he said. In his north Dublin constituency alone, eight garages had closed.
On the slight dip in inflation, SIPTU President Jack O'Connor said people should not be "thankful for small mercies", because of a slight dip in inflation as interest rates would hit home next month.
- Aideen Sheehan
