why are prices in Ireland accelerating again? – The Irish Times

After falling to less than 1 per cent this time last year, headline inflation has risen back over 3 per cent, placing a renewed squeeze on Irish households. The latest Consumer Price Index (CPI), the State’s official measure of inflation, clocked annualised price growth at 3.2 per cent in November.

This was the highest level recorded since February 2024.

So what’s driving it?

In a word, restaurants. The biggest driver of the November figure were restaurants and hotels, which saw prices rise by 3.6 per cent on an annualised basis.

While other sectors like education had bigger year on year price hikes, the restaurants and hotels category, which includes coffee shops, has a significantly bigger weighting in the overall rate. It accounted for 0.73 per cent of the 3.2 per cent rate recorded last month.

Prices in restaurants rather than the cost of hotel accommodation were pinpointed as the main culprit. And apparently these relate directly to higher food prices.

The price of basic foodstuffs has been elevated for months and it seems this has now percolated into restaurants and onto menus. The cost of meat and in particular beef was highlighted as the biggest single factor. Separate CSO data, published on Friday, indicated the cost of cattle rose by 47 per cent year on year in October.

What else is behind it?

Food inflation remains elevated in Ireland with prices rising by 4.2 per cent in the 12 months to November. Food also has a big weighting in the overall calculation. It accounted for 0.46 per cent of the 3.2 per cent.

Within the food category, the price of beef was up almost 24 per cent year on year while lamb and poultry was up 17.9 per cent and 7.4 per cent respectively. But meat wasn’t the only driver, butter was up 10.2 per cent, milk (4.8 per cent), chocolate (11.5 per cent).

Higher food prices reflect the lagged effect of higher energy prices. Daragh Cassidy of price comparison website Bonkers.ie said gas prices are still “double where they were three or four years ago before the war in Ukraine, and electricity prices are around 70 to 80 per cent higher than they were, so they are still very high”.

The housing, water, electricity, gas and other fuels category accounted for 0.56 per cent of the 3.2 per cent recorded in November with higher electricity prices (earlier in the year) and higher home heating oil prices going into winter highlighted as factors.

What about statistical base effects?

Part of the reason for the latest inflation flare up – it’s difficult to pinpoint how big a part – relates to what statisticians refer to as base effects.

If the inflation rate was particularly low in the corresponding months last year even relatively small change in prices will automatically give rise to a higher rate now.

Inflation fell to 0.7 per cent in September and October last year and was still just 1 per cent in November. An interesting aside, the Central Statistics Office (CSO) recorded to price changes related to Black Friday for the first time last year, which anchored the overall rate.

What else?

Ireland has two inflation barometers on the go. The CPI and the HICP (harmonised index of consumer prices). The latter is produced for the European statistical agency Eurostat to allow it compare price growth across euro zone member states and generate a measure of inflation for the bloc as a whole.

The main difference between the two measures is mortgage interest costs, which is included in the CPI but not the HICP. Both measures diverged for a bit in 2023 but are now both back at around of 3 per cent.

Why is euro zone inflation lower than Irish inflation?

A flash estimate of euro zone inflation in November put it at 2.2 per cent, marginally up on the 2.1 per cent recorded the previous month. Insiders say the disparity between Ireland’s rate and the wider euro area again relates to food which, while elevated everywhere, are more elevated here.

The Central Bank and others have continually warned about the domestic drivers of inflation and their potential to create a different price dynamic here. It’s probably too early to say if elevated food prices here are evidence of this dynamic.