Ireland’s inflation experience over the past year is broadly in line with what is happening across the EU. Energy prices have been the main culprit as the price of oil and then gas surged and electricity cost rose as a result.
Looking at the December, the last full set of data available, annual inflation in the euro zone was 5 per cent versus 5.7 per cent in Ireland, using the harmonised measure which allows comparison. The graph shows how inflation here has tracked the rest of Europe in recent years.
For Ireland and the rest of Europe soaring energy prices are by far the most significant factor, with the housing and energy category of the inflation measure rising 11.8 per cent in Ireland and 9.8 per cent across the euro zone. The energy component of this category has risen by 25 per cent plus in both Ireland and the EU year on year.
Rents are also included in this category and Irish rents rose 7.7 per cent year on year according to the CSO– Irish rental growth has been sharply outpacing the EU average in recent year, with rents here close to 70 per cent higher since 2010, compared to a euro zone average of around 15 per cent.
The other area where prices have increased sharply is transport, again driven by the impact of higher energy costs on petrol and diesel. The transport category in Ireland has increased by 18 per cent over the past year, compared to an EU average of 10.4 per cent.
With petrol and diesel prices rising across Europe the higher rate in this category in Ireland seems to relate to other issues such as car prices.
Elsewhere inflationary pressures are much lower both in Ireland and across the EU, though recent months have seen food prices starting to tick up and a knock on from the impact of blocked up supply chains on a range of other products, notably household electrical goods and cars.
Food prices across Europe have been increasing more rapidly than in Ireland, perhaps a sign of things to come, while there are also signs of a bounceback of hotel and restaurant costs after the pandemic.
The other issue for Ireland is the point where we start this inflationary cycle. The actual level of prices here,according to Eurostat, is the joint highest in the EU alongside Denmark for a basket of 2,000 consumer goods and services. Prices here are 40 per cent above the EU average. So Ireland is already a relatively expensive place to live.
