Monday 20 November 2017

Mortgage and energy costs keep consumer prices high

Ailish O'Hora

Ailish O'Hora

CONSUMER prices increased slightly in the past year on the back of mortgage interest hikes and rises in energy costs.

The increases were offset by a significant price drop in food, drink, clothing and household goods, new inflation figures reveal.

And consumers can look forward to cheaper food and drink costs this autumn as competition among retailers intensifies.

Overall, the cost of living increased by half a per cent in the year to September, according to figures released by the Central Statistics Office (CSO).

The biggest changes in goods and services were education, which increased 9.5pc, and housing, water, electricity and energy which were up 8.5pc.

On an annual basis, the cost of alcohol, clothes and footwear and household furniture, equipment and maintenance also fell.

However, the benefit to consumers was wiped out by huge mortgage interest rate increases (25pc) and fuel hikes.

On a monthly basis, consumer prices fell slightly by 0.1pc with this trend expected to continue.

The biggest drops were experienced in the cost of transport (-1.6pc) although the cost of clothing and footwear rose 4.5pc due to a recovery in prices following the summer sales.

Economists said prices will continue to fall in the run-up to Christmas as retailers come under pressure to cut prices and entice shoppers.

"Consumer confidence, which had been on the mend, has deteriorated over the past few months so retailers will have to fork out a lot harder coming up to Christmas," National Irish Bank chief economist Ronnie O'Toole told the Irish Independent.

However, while price drops will be welcomed by consumers, the trend is not good for the overall economy.

As prices continue to fall in the short to medium term, the outlook for the economy worsens because continued price drops can lead to deflation -- the opposite to growth in the economy.

"In overall terms it would be wrong to assume the threat of deflation has gone away completely, and policymakers around the world would need to remain on their toes," Bloxham Stockbrokers economist Alan McQuaid said.

Business representative group IBEC also warned of the threat of ongoing price falls.

"Following the end of the summer sales in clothing and footwear, we would have expected to see average prices rise marginally in September," IBEC economist Fergal O'Brien said.

Irish Independent

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