The CSO have released the March CPI numbers and headline inflation is now running at 3.0%. Looking at our measure of core inflation, we see that this has moved into positive territory for the first time in almost two years.
Up until now the positive inflation we have had has been driven by energy prices and mortgage interest. Energy prices are largely determined externally, though the increase in excise duty in last December’s budget are also a factor. Mortgage interest rates have been driven up as our ailing banks have been pushing up variable and fixed rates for the past 18 months or so. Here are the inflation rates in these categories for the past three years.
Energy inflation is now running at 14.8% with mortgage interest an eye-watering 28.6%. Both of these are likely to increase in the coming months.
Up to now there was some solace that the positive CPI rate was not determined by the movements of core prices in the Irish economy and were only reflective of substantial changes in particular sectors. This is now not true and prices are rising (or falling less slowly) across all sectors of the economy.
We can see this if we compare the current annual inflation rate in the 12 commodity categories provided by the CSO to that from last November.
Of course, some sectors still are exhibiting deflation as can see. The point is that in sectors with inflation prices are now rising faster and in sectors with deflation prices are now falling slower.
This is not to say that everything is getting more expensive. It is just indicative of where prices changes are going. Here are the actual price changes showing that some things are cheaper.
If we compare the price of these commodity groups to last November we can see that for clothing, furnishing, recreation, education and restaurants prices are now lower than they were five months ago. Over the coming months it is likely that fewer of these comparisons will be negative.
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