Lower-income households are being hit harder by the current surge in inflation, according to a new study by the Central Statistics Office (CSO). This is because they spend a greater proportion of income on food, energy and transport.
Although headline inflation was running at 6.7 per cent in March, as measured by the CSO’s Consumer Price Index (CPI), the study found that households with the lowest incomes experienced significantly higher levels of price growth — up to 7.6 per cent — while those in the highest income category had annual estimated inflation of 6.1 per cent.
Renting households were also found to be experiencing a higher rate of inflation, averaging 7 per cent for those renting from a private owner and 7.3 per cent for those renting from a local authority.
The study also detected a regional disparity — 6.5 per cent for urban households compared with 7.3 per cent for rural households. Rural households typically tend to spend more on transport, meaning they are more exposed to rising fuel costs.
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Higher-than-average inflation was also observed for households of one adult (7.7 per cent), one adult with children (7.2 per cent) or two adults without children (6.9 per cent). Households where the reference person was under the age of 35 had lower average inflation than those where the main person was over 65.
“The increasing rate of inflation since the middle of 2021 has prompted greater interest in price change and its effects on households,” Edel Flannery of the CSO said.
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“The CPI is a measure of average inflation for all households. However, each household has its own unique consumption pattern of goods and services and therefore its own personal experience of inflation,” she said.
Ms Flannery noted that while the official measure of inflation shows that prices for consumer goods and services increased by 6.7 per cent in the year to March, “the estimated annual inflation by household income categories showed a range from 6.1 per cent for the top 10 per cent of households by income, to 7.5 per cent for the lowest 10 per cent of households by income”.
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Irish households are experiencing the biggest cost-of-living squeeze since the 1980s, with headline inflation now running at 7 per cent and expected to go higher in the coming months, due — in the main — to higher energy, fuel and grocery prices.
The main drivers of price growth in April were energy and fuel. Electricity, gas and other fuels were up more than 45 per cent year on year. Within this category, electricity prices were up 28 per cent, while gas prices rose by more than 50 per cent. The cost of motoring has also risen sharply, with petrol and diesel prices up 24 per cent and 40 per cent respectively since April last year.
Consumer prices across the OECD rose 9.2 per cent year on year in April, according to data published on Thursday, which pointed to a strong pick-up in food price inflation, which hit 11.5 per cent.
A separate study by the Central Bank this week found that the vast majority of Irish households expect inflation to rise further over the next year to an average of 10 per cent. But half of workers don’t expect to receive any pay rise over the period, with another third predicting only a slight increase in pay.
