Justin Doran
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Prices on the Rise Again

4/7/2011

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The latest release of the Consumer Price Index (CPI) from the CSO suggests that prices in Ireland are on the rise.  From March 2010 to March 2011 the overall price level in the economy has increased by 3%, with March 2011 seeing a 0.9% increase in prices.  But what are driving these price increases? 

Looking into the figures it is notable that a number of categories have been driving the rising prices over the last year.  One of the biggest increases was observed in the Housing, Water, Electricity, Gas and Other Fuels category.  This category measures the amount which s rents, mortgage interest repayments, local authority service charges, goods and services for maintaining, decorating and repairing dwellings and domestic energy products such as electricity, gas and solid fuels increase or decrease.  In total this category increased by 12.5% in the year to March.  This is not good news for house owners as it reflects the higher mortgage repayments they have had to make due to increase in the interest rates charged by banks.  Likewise, it reflects the increases in prices in domestic fuel consumption which places additional pressures on home owners.

Increases have also been observed in the transport category which covers the purchase of new and second hand vehicles, spare parts, car maintenance, fuels and lubricants, public transport and services such as parking, motor association subscriptions, car wash, toll charges, driving tests, licences and car hire.  This has increased by 4.1% in the last year reflecting the increased charges in public transport, parking and driving tests.

While the price of food and non-alcoholic beverages, purchased in supermarkets, small shops, speciality shops and petrol station forecourt outlets but excluding meals out which are covered under Restaurants and Hotels, has increased by 1.6% the price of restaurants and hotels, which covers meals in restaurants and hotels; fast food and takeaways; cafes; canteens; alcohol consumed on or within a licensed premises and accommodation services supplied by hotels, guesthouses and hostels, has fallen by 1.3%.  This suggests that supermarket prices are on the rise while prices in restaurants are still falling.

Overall, there is an upward trend appearing in prices, however, the areas in which there are increasing prices appear to exist in areas where individuals are currently under financial pressure such as in the mortgage sector.  With the European Central Bank expected to increase interest rates in the near future, this suggests further increases in the costs of mortgage servicing.
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    Justin Doran is a Lecturer in Economics, in the Department of Economics, University College Cork, Ireland.

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