Consumers face rising prices in autumn as businesses pass on increased costs

Families face rising prices this autumn as shops and businesses pass on increased costs to their customers.

Post-pandemic and Brexit bottlenecks are driving up the cost of many imported goods and raw materials, a Bank of Ireland survey shows today.

According to the bank’s Economic Pulse, shops, services, builders and industries say non-labour costs have risen over the last three months.

Bank of Ireland states that many are "saying that they are likely to hike selling prices in response".

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Duncan Graham, managing director of industry body Retail Excellence, confirmed at the weekend that members were reporting increases in both staff costs and product prices, particularly for imported consumer goods.

He predicted that price increases could feed through to stores through the autumn, particularly as the build-up to Christmas begins.

“There’s a lack of people out there. And there are also increased supply chain and product costs. A number of retailers are struggling to get products out of the Far East.”

Mr Graham said the cost of doing business in China, and of shipping goods from there, had increased sharply since the pandemic.

He suggested that shoppers could avoid the worst of the price rises by buying locally produced goods.

Raw materials

Surging demand and raw materials shortages have already hit DIY enthusiasts.

Last week Gavin Slark, chief executive of Grafton Group, owner of the Woodie's chain, said rapidly rising product prices had forced the business to pass on some costs.

Local shortages of timber, allied with manufacturing disruptions caused by Covid-19 and extreme weather, have sent the prices of building materials soaring by up to 60 per cent.

Food and Drink Ireland, part of employers' lobby group Ibec, warned this month that the cost of everything from raw materials to insurance was rising. Its director, Paul Kelly, said that businesses expected the trend to continue into the coming months, potentially hitting competitiveness.

Dr Loretta O’Sullivan, group chief economist with Bank of Ireland, said the price rises could be fairly broadly based.

She noted that the difficulties affected imported goods and components used in manufacturing here, which in turn impacted exporters.

Recent figures showed inflation here at 2.2 per cent following a long period where it was muted, according to Dr O’Sullivan.“We are going to see more upward pressure in terms of consumer prices.”

However, she suggested that some of this could abate over time as bottlenecks ease.

Economy

The problem cooled business optimism this month, according to the Bank of Ireland Economic Pulse, which came in at 88.8 in August, 0.4 lower than July, but 29.5 up on 12 months ago.

The survey, published on Monday, shows 55 per cent of families believe the economy will improve in the next 12 months, while one in three predict their finances will improve.

This is in contrast with this time last year when rising Covid rates cast gloom over households, leaving them fearful for their finances.

Dr O’Sullivan dubbed the findings a mixed bag, with consumer confidence rising but business sentiment slipping. “This reflects some catch-up on the part of households and some pausing for breath on the part of firms,” she said.

“It is also the case that the big gains associated with the reopening of the economy are largely behind us.

“There has been a substantial easing of the public health restrictions in recent months, and we are now starting to see the Economic Pulse, and similar indicators in other countries, plateau at relatively high levels.”

She noted that some reopening remained, so future surveys would show the impact of Government plans on sentiment.