Rising transport and housing costs pushed the annual rate of Irish inflation to a higher than expected 2.3 per cent in June, the latest Consumer Price Index (CPI) shows today.
The CPI, which measures price changes in a basket of goods and services, increased by 0.6 percentage points in June. The index recorded no change in the same month last year.
The main factors behind the monthly rise were higher transport costs from increases in petrol and diesel prices. Rising oil prices also fed into housing costs which include home heating.
The annual rate of inflation for goods was 1.6 per cent in June while the corresponding rate for services was 2.6 per cent.
Despite the spike in inflation in June, economists remain confident that inflation will moderate towards end of the year after a brief summer upturn.
Much of the rise recorded in June is due to weak year-on-year comparatives in 2003 while the underlying trend is still downward, according to Mr Dermot O'Leary, economist with Goodbody stockbrokers.
Mr O'Leary noted that services inflation which has had a significant impact on inflation readings over the past year, has fallen significantly. Services inflation, which averaged 7 per cent and 4.8 per cent for 2002 and 2003 respectively, currently stands at 2.6 per cent.
"Given this benign pricing environment, we forecast the inflation rate falling in the final five months of the year, following a further uptick in the inflation rate in July on the back of another weak year-on-year comparative," Mr O'Leary said.
IBEC's chief economist, Mr David Croughan also blamed fuel price increases for the rise in inflation
He pointed out that prices of fuels and lubricants are up 16.7 per cent on the previous year, with knock on consequences for transport and domestic energy costs.
Mr Croughan said that the rise in fuel prices would put further pressure on business margins, threatening competitiveness. "It is important that government plays a more urgent role in tackling the inflation in the cost of public service provision and that it does not exacerbate the oil price rise by increasing taxes on energy products", he added.
The European Union (EU) HICP measure for Ireland showed annual inflation at 2.5 per cent in June, ahead of the eurozone estimate of 2.4 per cent.
The most notable changes in the year were increases in education (+ 6 per cent), health (+5.8 per cent), transport (+5.5 per cent), and restaurants (+3.6 per cent).