Core Inflation Rises

Yesterday’s Consumer Price Index release for July from the CSO shows the overall rate of inflation falling for the fourth month in a row.  However, the source of inflation in Ireland is slowly beginning to shift.

July marked the since the start of 2010 that the overall inflation rate was equal to the ‘core’ inflation rate.  In this instance the core inflation rate is the 85% of the overall index that excludes energy products and mortgage interest.

The overall index is being pulled down by reductions in mortgage interest (particularly for trackers with ECB rate now at 0.75% compared to 1.50% this time last year).  Excluding mortgage interest inflation is still running at 2.3%.  Since March the overall rate of inflation has fallen from 2.2% to 1.6%.  However there has been no significant drop excluding mortgage interest is just from 2.4% in March to 2.3% now.

Annual inflation is now being driven up by the following products (number in brackets is the expenditure weight in the CPI showing the importance of the price change):

• Tobacco (2.6%) +6.5%
• Private Rents (4.4%) +2.0%
• Housing maintenance materials (0.3%) +3.9%
• Non durable household goods (0.7%) +2.3%
• Electricity (2.3%) +14.5%
• Gas (1.2%) +18.1%
• Health (4.6%) +0.7%
• Motor fuel (6.1%) +6.3%
• Motor tax (1.2%) +10.8%
• Bus and taxi fares (1.0%) +6.4%
• Air passenger transport (1.6%) +3.0%
• Newspapers, books and stationery (1.5%) +1.7%
• Package holidays (0.7%) +3.3%
• Third-level education (1.6%) +13.5%
• Licensed premises (6.5%) +1.7%
• Health insurance (2.9%) +15.3%
• Motor insurance(1.7%) +1.7%

There are numerous categories that have seen price declines as well and these are in the detailed sub-indices from the CPI.