Consumers facing an autumn of discontent as deflation era ends
CONSUMERS face an autumn of rising prices as official figures revealed the era of deflation is coming to an end.
It will leave families already hit by mortgage rate hikes, higher electricity charges, back to school costs and the possibility of soaring food prices struggling to pay even higher bills out of lower incomes.
Consumers have recently been hit by higher prices for food, alcohol, cigarettes, landline and mobile phone use, hospital charges, over-the-counter medicines and transport, while they also saw increases in the cost of home and car insurance.
And though they saw falls in the price of clothes, shoes and furniture, prices were heavily discounted for the summer sales. This meant the 7.1pc drop in clothing prices was actually the smallest July drop since 1997.
Consumer watchdogs last night warned that families already grappling with lower wages, job losses, reduced hours and increased income levies will be hit by much higher bills this autumn.
"Families are facing back to school costs, mortgage hikes, higher electricity charges and food bills, and while that's been cushioned a little bit in the last year thanks to falling prices, that's no longer the case and we're going to see a return to price growth within 60 days," Consumers' Association of Ireland vice-chairman Michael Kilcoyne told the Irish Independent.
Overall prices were unchanged last month and are now just 0.1pc lower than a year ago -- the smallest annual drop in 18 months, according to latest figures from the Central Statistics Office.
Analysts predicted the overall cost of living could start to rise again next month for the first time since 2008 as the latest mortgage hikes by AIB and Bank of Ireland feed into the figures. An electricity price rise is also on the way.
"Next month's Consumer Price Index reading is almost certainly going to show the first positive inflation reading since December 2008," Ulster Bank chief economist Simon Barry said.
The euro's fall against sterling also meant that imports from Britain -- which make up a huge chunk of our total food, drink and clothing purchases -- are becoming more expensive.
Davy Stockbrokers predicted prices would start rising again by December as a result of mortgage hikes. The CSO figures revealed that mortgage repayments have soared by 17pc in the last year alone.
The CSO figures show significant increases of between 1pc and 2.9pc for items such as margarine, soft drinks, poultry, vegetables, breakfast cereals, coffee and tea -- the kind of monthly rises which, if replicated over a year, could add hugely to their cost. However, prices for some items such as lamb, bread, cakes and fruit juice fell.
Food economist Ciaran Fitzgerald said consumers could expect to see increases in the price of dairy foods, particularly butter and cheese, as rising demand in countries such as Russia, China and India meant world prices were rising sharply.
The CSO figures also show Irish dairy prices rose slightly last month, but are still around 4pc lower than a year ago.
The Irish Small and Medium Enterprises Association accused the Government of sabotaging industry by foisting random cost increases on them that were masked by the general inflation figures.
And the Small Firms Association agreed that Government-controlled costs such as education, public utilities and transport had risen in the last year with any price decreases largely a result of reduced interest rates and lower demand in the recession.
"Structural and policy changes are necessary to ensure prices remain low and do not increase when economic growth returns," SFA Director Avine McNally said.