Clothing and communications push down inflation

The harmonised consumer price inflation rate (HICP) fell to 1.3% year on year in July, compared with 1.5% in June, despite the sharp increase in international oil prices.

For the period January-July 2005 the HICP recorded an increase of 2.1% compared to the corresponding period of 2004.

Financial Mirror analysis shows that the main reason for weak inflation was the large drop in the prices of clothing and footwear. These fell by 20.5% compared with June 2005.

A drop in clothing and footwear prices is to be expected in July, as the summer sales season starts, but the fact that prices were also 4.6% lower than in July 2004 suggests that retailers made particularly steep discounts this year.

Communications prices continue to fall as competitors fight it out among each other for market share–and, in the case of CyTA, fight it out with the regulators.

Transport and housing on the rise

A taste of things to come, however, is evident in the prices of housing, water electricity and gas, and transport, both of which are affected by high world prices for oil.

Housing, water electricity and gas prices in July rose by 2.9% compared with the previous month, and by 8.6% compared with July 2004.

Similarly, prices of transport rose by 1.9% compared with June 2005 and by 2.5% compared with July 2004.

Fiona Mullen