Headline inflation in the Irish economy rose to 2 per cent in August, up from 1.7 per cent the previous month, on the back of higher food prices and insurance costs.
This is the first time that inflation has been at, or above, 2 per cent since April. The underlying rate, which excludes volatile energy prices, was also above 2 per cent (2.1 per cent).
The latest Consumer Price Index (CPI), the State’s official measure of inflation, showed food prices continued to rise at an elevated rate of 5.1 per cent year on year.
This is the highest level of food price inflation recorded since December 2023 when the annual increase was 5.6 per cent.
RM Block
“Food and non-alcoholic beverages rose due to higher prices across a range of products such as meat, milk, cheese and eggs, chocolate and confectionery, breads and cereals and mineral waters, soft drinks, fruit and vegetables juices,” the Central Statistics Office (CSO).
The acceleration in food prices is being driven by higher agricultural output prices which are a reflection of higher energy and fertiliser prices.
[ Spending overrun likely to top €2.5bn this year, watchdog warnsOpens in new window ]
The latest inflation figures showed the cost of health insurance and motor insurance rose by 7.8 per cent and 5.8 per cent respectively in the 12 months to August.
The cost of housing, water, electricity, gas and other fuels increased mainly due to higher rents, which rose at an annual rate of 4.2 per cent.
What can we potentially look forward to in Budget 2026?
The cost of electricity and gas also rose by 2.4 per cent and 1.4 per cent.
The only sectors to record a decline when compared with August 2024 were transport (-2.3 per cent) and furnishings, household equipment and routine household maintenance (-0.8 per cent).
Transport prices decreased due to lower prices for airfares, petrol and diesel.
The CSO’s figures show consumer prices rose by 0.4 per cent month on month.
[ One-off cost-of-living measures to be replaced in Budget 2026Opens in new window ]
“While annual headline inflation remains relatively modest at 2 per cent, there are certain areas which continue to dwarf the rate of general inflation,” said Geraldine Kelly from insurance broker Gallagher in Ireland.
“These include home insurance premiums – where at 2.6 per cent, price increases are above the rate of annual inflation, and motor insurance premiums – where price increases are three times the rate of inflation,” she said.
“There has been great progress in reducing the cost of claims and motor insurance premiums in recent years but sadly this has been heading the wrong direction of late and ultimately consumers are the ones to suffer,” Ms Kelly said.
Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK and RSM Ireland said while inflation remains subdued it was likely to accelerate over the next few months as favourable base effects drop out of the annual comparison.
“Looking ahead, inflationary pressures have eased. Lower energy prices will help to depress headline inflation and the rise in food inflation is probably close to peaking,” he said.
“Weaker global demand, US tariffs and still heightened uncertainty about US policy will also put some downward pressure on demand, helping to limit any rise in inflation,” he said.
