Davy Research |
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CPI inflation, March
Price pressures remain robust
12 April 2012
Conall Mac Coille, Chief economist |
Consumer price inflation 2.2% in March
The annual rate of inflation accelerated in March to 2.2%, up from 2.1% in February.
This reflected a sharp 1.0% rise in the index on the month following a 0.9% increase in February.
The annual rate of HICP inflation rose from 1.6% in February to 2.2% in March.
Sharp rise on month, driven by clothing and transport costs
The CPI index excluding energy products rose by 1.0% on the month in March, overall goods by 0.8% and services by 1.2%.
Clothing and footwear prices, which represent 5.2% of the overall CPI basket, rose by 2.7%.
The cost of transport, accounting for 15% of the CPI, increased by 4.0%, in part reflecting past energy price rises.
Price rises in February and March may also reflect a slow pass-through of the increase in VAT to 23%.
Sustained inflationary pressure is bad news for Irish consumer spending
We had forecast CPI inflation in 2012 to equal 2.1%, pushed up by energy prices and the VAT increase, despite a stagnant domestic economy.
Today's CPI release suggests that price pressures in the economy are somewhat stronger than we expected.
Stronger CPI inflation will eat into households' real incomes, which are already under pressure from weak nominal pay growth and budgetary measures.