Economics: Ireland’s annual inflation rate falls back to 0.2% in September

New figures from the Central Statistics Office (CSO) yesterday showed that Ireland’s annual inflation rate stayed in positive territory in September, but fell back from the previous month. Base effects should see the inflation rate picking up over the rest of 2017, but remaining below 1.0%.

The annual inflation rate came in at 0.2% as against 0.4% in August. Consumer prices were down 0.6% in the month, compared with a monthly rise of 0.4% in August. Meanwhile, the HICP rate, the measure used for EU comparative purposes, was also down 0.6% in the month, giving an annual inflation rate on this basis of 0.2% too.

The main monthly changes affecting the CPI in September were decreases in the cost of hotel accommodation and air fares. Clothing and footwear prices rose due to the ending of the Summer sales.

Despite strong Irish economic growth, there is little sign of sustained pressure on the prices front, which appears to be the same story across the Eurozone, suggesting that the European Central Bank will be in no hurry to tighten monetary policy.

Although the annual inflation rate is set to pick up between now and year-end, inflationary pressures in Ireland as measured by the headline consumer price index should in general stay reasonably-well contained for the immediate future.

Ireland’s average inflation rate was 0% in 2016, compared with -0.3% in 2015 and 0.2% in 2014. Based on the figures for the first nine months of the year and assuming a modest pick-up in inflation over the rest of 2017, it now looks like the average for the year as a whole will be around 0.4%.

Alan McQuaid
Economist