Headline inflation in the Irish economy surged to a 21-year high of 5.6 per cent in February.
Soaring energy prices, aggravated by Russia's invasion of Ukraine, are expected to push the level of price growth even higher in the coming months.
The latest consumer price index from the Central Statistics Office (CSO) detected a pick-up in prices in all but two sectors of the economy.
Energy prices were the main driver, with electricity, gas and other fuels up almost 29 per cent year on year.
Electricity prices were up 22.4 per cent, while gas prices rose 27.8 per cent. Home heating oil has soared by 54 per cent in just 12 months.
Energy companies are expected to announce further price hikes in the coming weeks, a reflection of increased wholesale prices across Europe.
SSE Airtricity in Northern Ireland last week announced a 39 per cent increase in gas prices. Industry insiders say 20-30 per cent price increases are likely to be the norm.
The CSO figures show the cost of motoring has also risen sharply, with petrol and diesel prices up 30.3 per cent and 32.5 per cent respectively. An increase in carbon tax included in October’s budget is expected to add further cost to fuel and home heating prices. Airfares have risen 42.3 per cent since February last year.
The Government has cut excise duty on fuel in a bid to soften the current price squeeze. A cut of 20 cent per litre on petrol and 15 cent on diesel came into force from Thursday.
Alcohol prices
Alcoholic beverages rose nearly 8 per cent due to higher prices in supermarkets and off licences, a reflection of generalised price growth and the adoption of new minimum unit pricing for alcohol.
Food and non-alcoholic beverages also increased nearly 3 per cent on an annualised basis due to higher prices across a range of products such as meat, bread and cereals, mineral waters, soft drinks, fruit and vegetable juices and milk, cheese and eggs.
The headline rate of inflation recorded in February was the largest annual increase in the consumer price index since April 2001 and comes amid Russia’s invasion of Ukraine and the US’s ban on Russian oil and gas imports.
There were price decreases in just two categories: the cost of education (down 0.8 per cent) and miscellaneous goods and services, which includes insurance, (down 0.4 per cent).
“Irish inflation looks set to move above 6 per cent in coming months,” KBC Bank Ireland economist Austin Hughes said.
“The cut in excise duties on diesel and petrol announced yesterday will shave 0.3-0.4 percentage points off the headline rate but this will restrain rather than reverse the current upward momentum,” he said.
In the US, latest inflation figures show that consumer prices in February surged to 7.9 per cent year on year, the largest annual increase in 40 years. While the numbers met expectations, investors feared that inflation would accelerate further in the coming months as Russia’s war against Ukraine drives up the costs of oil and other commodities.
“The fear was that it was going to be worse than it came out to be. The situation with inflation is not going to change any time soon,” said Jimmy Lee, chief executive officer of Las Vegas-based asset manager Wealth Consulting Group.
