Another Rise in Consumer Prices
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.
A recent report by Forfàs indicates that Ireland’s innovation performance is growing strongly. According to data from the EU wide Community Innovation Survey (CIS), displayed in Figure 1 below, Ireland is ranked 7th out of all EU member states in terms of the proportion of firms which perform technological innovation. The report defines a technological innovation as the introduction of a process or product innovation and discounts organisational or marketing innovation. Germany leads in terms of the proportion of firms engaging in technological innovation; with 63.8 percent of firms reporting that they introduced a new technological innovation during the reference period 2006-08. When considering organisational and marketing innovation (defined in teh report as non-technological innovation) it can be observed that Ireland is ranked 8th out of the EU countries.
However, when analysing the effective commercialisation of these innovations Ireland’s performance falls down. Figure 2 displays the proportion of turnover derived from new to market and new to firm process innovation. It can be seen that Ireland’s position is quite low down the rankings and indeed it has even fallen since 2006. This fall may be unsurprising given that the total turnover of a substantial proportion of firms has fallen. The proportion of turnover derived from product innovations can be used to assess whether new innovations are perhaps more resistant to downward pressure on sales than traditional, older products. However, the data presented in the Forfàs report fails to provide support for this; instead suggesting innovation sales have fallen.
This suggests that Ireland may not be capitalising on the innovations it introduces. We are introducing new products, processes, organisations and marketing changes at a rate almost matching the EU leaders, however, when it comes to commercialising these innovations we are falling behind. This may suggest more of a role to play for government support in getting innovations to market and ensuring that the innovations achieve access to the desired markets to support growth.
Ireland is to get a reduction in the loan rate from the EU/IMF bailout package of approximitly 1% according to BBC news.
This reduction would be worth over €400 million to Ireland over the duration of the loan. It comes after lobbying from the Irish government since the recent elections. It should strengthen Enda Kenney's position and allow him to claim that he is fulfilling the promises he made in the build up to the elections that he would re-negotiate the loan rate.
Justin Doran is a Lecturer in Economics, in the Department of Economics, University College Cork, Ireland.