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Annual inflation rate of 0% in December and for 2016 as a whole

Written by Robert McHugh, on 19th Jan 2017. Posted in Economy

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The annual inflation rate came in at zero in December, as against -0.1% in November and -0.3% in October according to new figures released by the Central Statistics Office (CSO) this morning.
 
Consumer prices were also unchanged in the month in December. Meanwhile, the HICP rate, the measure used for EU comparative purposes, was down 0.1% in the month, giving an annual inflation rate on this basis of -0.2%, the same as in the previous month.
 
The main monthly changes affecting the CPI in December were decreases in the price of alcohol sold in supermarkets/off-licences. The cost of clothing and footwear fell due to the Winter sales. Against that, the price of petrol, diesel and home-heating oil rose as a result of higher global energy prices.
 
Merrion Stockbrokers have today warned that oil prices will be critical in determining the headline inflation outlook over the next twelve months or so, but they remain volatile and hard to predict given the uncertainty over potential OPEC output cuts. 
 
According to Merrion Stockbrokers, "Despite the booming Irish economy, inflationary pressures as measured by the headline CPI should in our view remain fairly well contained in the immediate future. That said, the cost of services like insurance and education are likely to remain elevated. The annual rise in motor car insurance was 8.8% in the final month of 2016, albeit down from 11.7% in November."

They added, "The more immediate worry on the inflation front is likely to come with increased wage demands. The strong recovery in Irish economic growth won’t help policymakers, as more and more people will be looking for pay to be restored to pre-crisis levels, likely leading to over-aggressive demands on the remuneration front, which if granted, will do more damage than good in the long-run. Indeed, we have already seen this with public-sector workers. And extra pay for public servants will mean less money being spent on vital services. The last thing the economy needs now against the uncertain “Brexit” backdrop is to become uncompetitive again through higher wage costs."

Source: www.businessworld.ie

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