Tuesday, January 25, 2011

Comparing CPIs

Here is just a quick comparison of the overall consumer price indices in Ireland and the UK since the start of 2007.

Irish and UK CPIs

Over the four-year period shown in the graph above the CPI in the UK has risen by 13.2%, with an equivalent rise in Ireland of only 2.0%.  This is substantial difference, and as we can see it is the last two years that has seen this inflation wedge emerge.

In 2007 the Irish CPI rose by 4.8% compared to 2.9% in the UK.  In 2008 the UK CPI rose by 3.8% with the CPI rise in Ireland moderating to 1.6% and by December 2008 the two indices with base of January 2007 were equal.  Over the past two years the CPI in the UK has risen by a further 7.5%, while in Ireland over the same timeframe the CPI has fallen by 2.1%.

It would be interesting to compare the main determinants of the two indices and the graph above does not account for any price differential that may have existed in January 2007.  However, the picture is clear and any price gap that did exist is being reduced.

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