Consumer price inflation rose to 1.1 per cent last month – the highest level in more than a year – as the partial lifting of Covid-related restrictions led to a pick-up in activity and housing costs rose.
The latest price data from the Central Statistics Office (CSO) showed the cost of an average basket of goods and services in the Irish economy is now rising again after several months of Covid-driven deflation.
The 1.1 per cent increase was driven by increases in the cost of housing, water, electricity, gas and other fuels (+3.6 per cent). Within this category, housing rents were up 1.6 per cent year on year.
There were also price increases in health (+3 per cent), restaurants and hotels (+2.9 per cent), and alcoholic beverages and tobacco (+2.2 per cent).
Conversely, there were decreases in the cost of clothing and footwear (-3.5 per cent ), communications (-1.9 per cent) as well as furnishings, household equipment and routine household maintenance (-1 per cent).
Struggled for years
Euro area inflation, which the European Central Bank has struggled for years to bring closer to its target of below but close to 2 per cent, is to accelerate to 1.7 per cent in 2021 from 0.3 per cent in 2020, the European Commission predicted this week.
World stocks were spiralling towards their worst week of the year on Thursday, as a bigger-than-expected rise in US inflation worried investors.
Data on Wednesday showed the US consumer price index jumped 0.8 per cent last month, outpacing a 0.2 per cent forecast.
The fear is that inflation pressures in the United States might force the Federal Reserve to start turning off its cheap money that has been driving markets rapidly higher.
"Inflation pressures are going to be rising, and they're not going to be temporary," said Jeremy Gatto, investment manager at Unigestion. "What does that mean? Effectively that (interest) rates will be rising," he said. – Additional reporting: Reuters
