Consumer prices increased again in April, with a rise in prices of 0.4% during the month. This means that in total the consumer price index indicates that between April 2010 and April 2011 consumer prices have increased by 3.4%. This is a substantial increase, and a strong turn around from the deflationary process experienced post-2008 recession.
When we look at what the drivers of the higher inflation rate are we can see that Housing, Water, Gas, Electricity and Other Fuels experienced the largest increase in price. This was followed by approximately 4% increases in Health, Transport and Communications. However, these were slightly offset by falls in the cost of Clothing and Footwear and Furnishing Household Equipment and Maintenance. Overall, these price increases are occurring in a lot of places where consumers would find it hard to cut back. For instance the costs of fuel for housing and health care. Likewise, increases in the cost of transport would have an impact through a number of channels on consumers.
Justin Doran is a Lecturer in Economics, in the Department of Economics, University College Cork, Ireland.