The cost of living crisis continues to deepen as new figures in Ireland – and across the world – reveal spiraling prices for essentials such as bread, housing and energy.
In Ireland, the consumer price index released by the Central Statistics Office (CSO), shows prices have risen by the highest annual rate increase in 38 years. The last time inflation hit these heights was in 1984 when Ireland was in the midst of a prolonged recession.
The CSO said that prices for consumer goods and services in June 2022 increased by 9.1% on average compared with June 2021 – another jump from 7.8% inflation recorded in the year to May. The statistics office said that prices had been rising since April 2021.
The most significant increases in the year to June 2022 were seen in Housing, Water, Electricity, Gas & Other Fuels which was up 22.5%, and Transport, up 20.4%, the CSO said.
Drilling down into energy costs the analysis showed that electricity rose by 40.9% in the year, while gas was up 57.2%%, and liquid fuels/home heating oil saw a whopping 115.4% increase. Solid fuels increased 26.2% in the year.
Bad news continued for motorists and travellers as the annual change in Transport costs reflected a 50.7% rise in the cost of diesel, while petrol increased by 43.8%. Airfares jumped by 38.4% compared to June 2021, and the cost of motor cars increased 13%.
For staple items like bread, the national average price for bread – a large (800g) white sliced pan – was up 13.9 cents in the year to May 2022, while the same size brown sliced pan was up 16.1 cents in the year.
Cans of cider and lager were up 10%. Pasta increased in price, while potatoes bucked the trend and the price of 2.5 kg decreased by 19.3 cents.
The CSO noted that rent accounted for 1.18% of consumer spend in 1984, but it now accounts for 7.64% – while Petrol & Diesel accounted for 6.09% of the basket in 1984 it was 3.71% in 2022.
A report from AIB bank also showed the impact of increased prices.
AIB Head of SME Banking, John Brennan, said: “During June, Consumers made fewer transactions, but those transactions were, on average, for larger amounts. This is an indicator that inflation is starting to impact Irish purchases and consumer behaviour. The food industry is particularly affected when it comes to changes in their supply chain costs, such as the price of petrol, fertiliser and feed for livestock.
Meanwhile, the European Union has warned that inflation will continue to surge across the eurozone – forecasting an average of 7.6% this year, a significant increase from earlier expectations of 6.1%.
Economic growth is expected to slide to 2.3% for the year, a considerable drop from last year’s expansion of 5.3% – and then expected to slide further to 1.4% in 2023.
EU vice president Valdis Dombrovskis warned that the war between Russia and Ukraine has led to surging energy and food prices which are driving the galloping inflation rate and impacting economic growth.
“Risks to the forecast for economic activity and inflation are heavily dependent on the evolution of the war and in particular its implications for gas supply to Europe,” an EU statement said.
In the U.S., as inflation hit a 40-year high of 9.1% – there were calls for the Federal Reserve to intervene and hike up interest rates in order to get spiralling cost of living prices under control.
Policymakers are expected to raise interest rates up to 3.5% that might tip the country into recession but bring costs back under control.
The US Bureau of Labour Statistics said that a 7.5% increase in the energy index contributed to almost half of the jump in headline inflation, and the Biden administration is seeing popularity plummeting as a result of the cost of living crisis.
South Korea is also raising interest rates by a historic half-percentage point to 2.25% in an attempt to deal with what it sees as runaway inflation which hit 6% in June – the highest since 1998 – and consumer concern at spiking energy and food prices. Increasing energy prices are also a driving factor in South Korean inflation.
In Canada, the central bank also hiked interest rates to 2.5% from 1.5% – described as a “super-sized increase” – and warned that further increases would be needed, amidst forecasts that inflation would hit 8%
The bank also said that a “sharp slowdown” in Canada’s housing market was under way, and that they expected that contraction to continue into 2023.