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Falling energy prices drag down inflation rate for May

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Shoppers at Tesco at Airside North County Dublin. Pic Steve Humphreys. 12th March 2020

Shoppers at Tesco at Airside North County Dublin. Pic Steve Humphreys. 12th March 2020

Shoppers at Tesco at Airside North County Dublin. Pic Steve Humphreys. 12th March 2020

The consumer price index fell for the second successive month in May as the shock to the economy from the coronavirus pandemic hit harder.

The index fell by 0.5pc from both April and from a year earlier in May “mainly due to a reduction in the price of home heating oil, electricity and gas”, the Central Statistics Office said in a report issued today.

“Transport decreased primarily due to lower prices for petrol and diesel,” it added.

The data published by the Central Statistics Office today does not however reflect the massive changes to our spending patterns as result of the lockdowns that have shuttered restaurant and cinemas and emptied our roads and public transport network.

The CSO keeps the same weightings for products and services in its inflation basket so the changes from month-to-month and year-to-year are comparable.

That means for example that increases of the costs recorded in May for restaurants and hotels as well as recreation and culture were largely irrelevant for consumers as these outlets had been closed by the lockdown.

A snap back in inflation into positive territory or an easing of the declines might be seen as indication that demand in the economy was starting to recover.

Ireland is not the only experiencing falling prices as a result of the shock caused by the coronavirus pandemic.

In the United States, headline consumer prices fell by 0.1pc in May following a 0.8pc decline in April, which was the most since December 2008.

Using the EU Harmonised Index of Consumer Prices HICP), the measure favoured by the European Central Bank when it sets interest rates for the Eurozone, Ireland’s month-on-month inflation rate was a negative 0.6pc and on an annual basis, it was minus 0.8pc.

An initial estimate of the figures for the Eurozone as a whole put the headline HICP rate at a negative 0.1pc in May.

Online Editors