Irish HICP inflation now close to highest rate in the euro area
The news yesterday the CSO’s flash estimate of Irish HICP inflation rose to 3.6% in March was almost exactly in line with our expectations – driven up by rising petrol and diesel prices. However, Irish consumers also have the 3rd highest exposure in Europe to the 80% rise in home heating oil prices over the past month. Hence, Ireland’s 3.6% HICP inflation rate is now close to the highest in Europe, well above the 2.5% euro area aggregate. Government actions on energy taxes may push down HICP inflation slightly in April, but it remains to be seen how quickly and by how much, Irish energy companies will raise household electricity and gas bills.
Yesterday’s European Commission (EC) survey of Irish consumer confidence showed sentiment falling to a three-and-a-half year low, hurt by expectations of elevated HICP inflation. Survey questions on expected inflation rose close to levels last seen during the outbreak of the war in Ukraine – which may be too pessimistic a view. However, expectations for major purchases showed a softer decline. The survey indicates Irish households plan to reduce their savings to the lowest level in a decade, albeit from elevated levels, to help sustain spending.
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