Saturday 24 March 2018

Factory gate prices rise in January as inflation drops

Economist Alan McQuaid
Economist Alan McQuaid
Gavin McLoughlin

Gavin McLoughlin

Irish wholesale manufacturing prices rose 2.2pc in January as prices fell in the wider economy.

The rise was driven by the fall in the value of the euro, which meant goods priced in US dollars became more expensive in the European single currency.

Though the price index for export sales rose by 3pc, the price index for home sales dropped 2.6pc. Significant price rises were posted by computer, electronic and optical products (up 6.3pc), and basic pharmaceutical products and pharmaceutical preparations (up 2.9pc).

Fish and fish products fell 2.4pc and dairy products dropped 2pc. Merrion Stockbrokers economist Alan McQuaid told the Irish Independent that from a economic point of view the most important thing about wholesale prices is whether a rise is feeding into consumers.

"Obviously at the moment it's not," he said.

The consumer price index released showed prices here fell 0.8pc in the month of January, spurred by low oil prices and the January sales.

Mr McQuaid said he expected inflation to continue to be negative for four or five months, before picking up steam later in the year due to the falling euro and a strengthening labour market.

But he said he doesn't think the economy is entering dangerous deflationary territory.

"The deflationary issue is really a case of whether you feel that consumers hold off because they think things will get cheaper, but I don't think that's the case.

"That tends to be in more in play when the economy is struggling - here I think there's a momentum in the economy."

"People are a bit optimistic about how things are going, you can see it in the labour market."

Irish Independent

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