Irish inflation continued to push higher in March, research showed.
According to the latest KBC Bank, Consumer Sentiment Survey, consumer prices were 6.7% higher than a year earlier, markedly faster than 5.6% increase seen in February and the fastest pace of increase since November 2000 (+7.0%).
"It is worth emphasising that the current bout of price pressures is entirely an environment of pain," Austin Hughes, analyst, KBC Bank explained.
"In the previous bouts of rapid inflation in the early and mid 2000’s, there was also an element of ‘party’ as booms in domestic spending were an important contributory element. There is no significant domestic demand element to current inflation and this is important in terms of calibrating the right shape and scale of policy response."
Energy Costs Increase
The data indicated that the 'key culprit' in the March inflation uplift was energy costs.
"Indeed, six of the twelve main commodity headings in the basket of goods and services used to measure Irish consumer prices showed lower year-on-year inflation in March than in February, an outturn that suggests price pressures are still concentrated in a small but significant number of areas," he said.
Food Price Inflation
Food price inflation edged up to 3.1% from 3.0%, the research showed.
Referring to recent research conducted by the Central Statistics Office (CSO) Hughes noted, "While there were significant price hikes for flour and pasta, the CSO food price measure is not yet reflecting the sharp increase seen in input prices".
Unfortunately, inflation looks set to climb higher in coming months.
Where precisely it may peak is almost impossible to say given current uncertainties around energy costs but, on current trends, inflation may hit 8% by summer.
KBC Bank noted that what seems to be becoming clearer is that current price pressures also seem set to last longer than previously thought.
It had been expected that inflation would ease back markedly later in 2022 on some pull-back in oil prices, it added.
However, war in Ukraine means energy costs are now likely to remain elevated for some time.
"Food prices are under marked upward pressure because of higher input costs and war-related supply disruptions," Hughes added.
"The larger and longer energy driven surge in inflation is also spilling over into broader cost pressures across a range of other areas."