THE ANNUAL rate of inflation increased to 4.7 per cent in May from 4.3 per cent the previous month, according to the Consumer Price Index published by the Central Statistics Office (CSO).

The CSO's May price survey found that the most significant monthly changes were in housing, water, electricity and gas - which rose 1.6 per cent on the back of higher mortgage repayments and further increases in oil prices.

The prices of products and services in this sector have now risen by 10.6 per cent in the year to May.

There was also a sharp monthly rise of 1.2 per cent in transport costs due to higher petrol and diesel prices, which the CSO said were "partially offset by a decrease in airfares".

Surging global oil prices has led to a 4.5 per cent increase in transport costs over the last 12 months, the figures show. The price of food and non-alcoholic beverages, which have risen by 7.8 per cent in the year to May, rose by 0.4 per cent after remaining static in April. Consumer prices in May, as measured by the CPI, rose by 0.8 per cent in the month, compared to an increase of 0.4 per cent in May of last year.

The annual rate of inflation for services was 5.3 per cent in May, compared with 4 per cent for goods. The CSO also found that prices for restaurants and hotels on average rose due to higher prices for hotels, guesthouses and BB accommodation.

The CPI, excluding the energy products index, was up by 0.4 per cent since April and by 4.3 per cent over the year, while the CPI, excluding mortgage interest, increased by 0.6 per cent in the month and rose by 3.6 per cent in the year.

Ulster Bank economist Pat McArdle said while airfares usually fall in the three months from March to May, this year they are up 16 per cent. Mr McArdle said the rising fares "probably reflect the imposition of fuel surcharges which have increased the cost of travel at a time when the global economy is cooling".