Energy costs push Irish inflation to 14-year high at 5.1%

Irish inflation shot to a 14-year high in October as rising energy costs, supply shortages and increased consumer demand drove up prices.

Over the past 12 months prices have risen by 5.1 per cent, according to the latest consumer price index from Central Statistics Office (CSO). The rise last month was the largest recorded since April 2007.

This time last year consumer prices were falling at an annualised rate of 1.5 per cent and had been doing so since the Covid pandemic hit in March 2020.

The annual rate of inflation turned positive only in April this year, but has accelerated since most restrictions were lifted in July. The 5.1 per cent rate in October is up from 3.7 per cent the previous month.

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According to the CSO, the sectors with the largest increases were transport (+15.4 per cent), housing, water, electricity, gas and other fuels (+10.8 per cent), communications (+5 per cent) and restaurants and hotels (+4.1 per cent).

Only one sector, clothing and footwear, has seen prices fall over the past year on the back of retailers discounting prices to accommodate new season stock as they reopened following an extended shutdown.

The main driver of energy costs was the price of electricity, which was up by an average of 15.5 per cent on this time last year, while gas prices were up 22.6 per cent. Home heating oil was up 70 per cent.

An increase in carbon tax included in last month’s budget is expected to further accelerate fuel and heating prices.

Within the transport category, the cost of petrol and diesel rose 21.6 per cent and 25.3 per cent respectively. But the biggest surge in transport inflation occurred, unsurprisingly, in air travel, where prices were 72.4 per cent higher than a year ago. Air fares rose 6.4 per cent last month alone.

Housing

The cost of housing was driven up by private rents, which increased by an average of 7.5 per cent over the past 12 months, while the cost of mortgage interest rose by 3 per cent.

Hotel accommodation was 17.3 per cent more expensive than in October 2020, but prices actually fell 4.7 per cent last month as the summer season came to an end. However, the cost of eating out is a more modest 3.8 per cent higher than this time last year.

Prices on average have now increased for 12 consecutive months, the longest sequence of monthly inflation since 2007. The cost-of-living squeeze comes amid a pick-up in inflation across the globe linked to energy prices and the post-Covid rebound.

US inflation rose to a 30-year high of 6.2 per cent this week . Last week US Federal Reserve chairman Jerome Powell warned that inflation had been "longer lasting than anticipated".

Mr Powell said the Fed still expected recent price rises to be “transitory”, but added that it was “very difficult to predict the persistence of supply constraints or their effects on inflation”.