The latest CPI figures released by the Central Statistics Office (CSO) show that the consumer price index in Ireland rose by 7.0% in the year to April 2022. This is a significant increase and highlights the need for careful budgeting and money management to maintain financial stability during times of inflation. However, the CSO report also notes that the main contributors to the increase were food, housing, transportation and alcohol and tobacco prices. So what can you do to protect yourself from inflation?
Highest inflation in 22 years.
The inflationary pressures that many households are currently facing are shown in this latest data. The rise inflation of 7.0% in April 2022, up from an annual increase of 6.7% in March 2022. This is the highest rate of inflation seen in almost 22 years, when annual inflation also stood at 7.0% in November 2000. As a result, many households will be feeling the squeeze
Transport costs also rose sharply, driven by higher fuel prices. Transport was up 18.9% and Housing, Water, Electricity, Gas & Other Fuels up 17.1%. With many households still facing an uncertain economic outlook, how long these high inflationary pressures will continue. Overall, this is a worrying trend and is likely to continue in the months ahead.
No escaping the highest rises
Essential household bills are rising rapidly. In the CPI, the divisions with the most significant increases in the year to April were Transport and Housing, Water, Electricity, Gas & Other Fuels. These hikes are not affordable and cast a long-term risk on people's ability to maintain their current lifestyle, let alone make ends meet, as most prices are related to essential purchases like food, fuel and heating.
April specifically saw some significant changes, with some sectors experiencing a marked increase in growth while others shrunk. The divisions with the largest increases were Clothing & Footwear (+3.9%), Communications (+2.9%), Restaurants & Hotels (+1.7%) and Transport (+1.7%).
Some small respite from price inflation.
However, there were some areas where consumers could find respite from the rising prices. Miscellaneous Goods & Services (-1.6%), Education (-0.8%) and Health (-0.4%) were the only divisions to show a decrease when compared with April 2021. However, these expenses are only a fraction of the monthly costs of the average Irish household and s not enough to counterbalance the ever-rising prices.
On balance, consumer prices rose by 0.9% in the month between March 2022 and April 2022. This increase was driven by higher prices on the abovementioned goods and services, including food, transportation, and housing.
An apparent shift in spending patterns
An interesting decrease in the month was seen in Alcoholic Beverages & Tobacco (-0.6%). This appears to be due to lower prices of wine sold in supermarkets and off-licences. These results show a clear shift in spending patterns, with consumers favouring essential items over non-essential ones.
This is likely due to the pandemic, which has led to a decrease in disposable income for many households.
The clothing and footwear sector rose this month as consumers looked to update their wardrobes after months of being confined to their homes. The transport sector also saw significant hikes, as people began to travel more now that restrictions have eased in some parts of the country.
The restaurant and hotel sector fared well as people took advantage of the summer weather to eat out and staycation locally.
It is good to see these sectors opening again; however, the new post covid price points are being felt in consumers' pockets.
What will policymakers do?
Understanding what is a 'necessary expenditure' needs to be revisited as a matter of urgency. Policymakers in the government departments need to provide solutions that ensure that these price rises do not erode living standards and instead allow for sustainable growth in line with wages. This can only be achieved by examining all the levers available to them to curb inflation and bring prices back in line.
How they do this, well, we'll have to wait and see.