Consumer prices increase 0.1% in December

Inflation data just released by Ireland’s Central Statistics Office (CSO) show that consumer prices, as measured by the CPI, increased 0.1% m/m in December. The year-on-year growth rate increased to 1.2% from 0.8% in November. 

Only three of the twelve components of the CPI increased in December: Restaurants & Hotels (+0.7% m/m), Food & Non-Alcoholic Beverages (+0.6% m/m) and Miscellaneous Goods & Services (+0.6% m/m). Restaurants & Hotels increased due to higher prices for alcohol on licensed premises (+1.8% m/m); health insurance (1.4% m/m) and hairdressing (+4.6% m/m) drove Miscellaneous Goods & Services higher, while the increase in food prices was broad-based. Clothing & Footwear (-1.3% m/m) was the largest drag on consumer prices due to Christmas sales. Interestingly, alcohol prices in off licences and supermarkets were 2.1% weaker month-on-month, suggesting retailers may not have passed on increases in excise duties announced in December’s Budget to consumers.

The annual average rate of inflation in 2012 was 1.7%, down from 2.6% in 2011. The annual rate of inflation softened in the second half of the year, ending 2012 at 1.2% (end-2011: 2.5%). Transport (+4.2% y/y) and Miscellaneous Goods & Services (+5.7% y/y; driven by insurance premiums) were the largest contributors to inflation during 2012.

The increase in consumer prices recorded during December broke a run of three months of negative price movements. We would expect to see the rate of inflation pick up in coming months as further indirect tax increases from the Budget take effect, transport fares rise and banks seek to push through further mortgage rate increases.