Dáil Éireann - Volume 522 - 27 June, 2000
Written Answers. - Inflation Figures.
Mr. Finucane Mr. Finucane
58. Mr. Finucane asked the Minister for Finance the reason service inflation is so high; and if he will make a statement on the matter. [18094/00]
Mr. Callely Mr. Callely
 176. Mr. Callely asked the Minister for Finance if, further to Parliamentary Question No. 37 of 23 May 2000, he will list the issues associated with the increase in inflation referred to in the reply as an increase in underlying domestic inflation; if he will list each issue; the way in which this can be addressed; and if he will make a statement on the matter. [17896/00]
Mr. McCreevy Mr. McCreevy
Minister for Finance (Mr. McCreevy): I propose to take Questions Nos. 58 and 176 together.
In my reply to Parliamentary Question No. 37 of 23 May 2000, I said that one of the factors behind the recent increase in inflation is an increase in underlying domestic inflation. Domestic inflation can be defined as price increases in areas such as services and related expenditure and alcoholic drinks where external influences such as import prices are not significant.
In the year to May 2000 alcohol prices increased by 5% while prices in the services sector rose by 6.4%. These price increases reflect either higher profit margins or higher input costs such as the cost of labour. Current information on the importance of these factors is not available. Our best assessment is that wages costs are increasing due to the tightness of the labour market and that these increases are adding to domestic inflation. Excessive profit margins in some sectors is also a contributing factor.
A full breakdown of the different components of the CPI follows, for information.
As regards the policy response, the best way to tackle domestic inflation is to improve competition where possible. Imbalances in the labour market which are fuelling wage increases must also be addressed.
Food prices rose by 1.3% in May, bringing the annual percentage change in the year to May to 3.2%. Price increases were recorded for lamb, poultry, potatoes and fresh vegetables, soft drinks, sweets and chocolates while the price of tomatoes and yoghurt fell.
Alcoholic drink prices rose by 1.2% in the month with increases across the board. The annual percentage increase fell marginally to 5.0%, contributing +0.65% to the overall annual  consumer price index in the twelve months to May.
Cigarettes and related tobacco prices rose by 1.4% in May following the introduction of a general trade price increase. The annual increase in the 12 months to May was 17.1%.
Clothing and Footwear prices remained stable in May.
Fuel and light costs fell in May following a reduction in the cost of home heating oil. The annual percentage increase in the year to May has dropped significantly to 38% having reached a high of 62% in March.
The cost of housing increased by 2.2% in May. This was due to an increase in the cost of private rented accommodation and increases in mortgage interest repayments.
Durable goods prices rose marginally in May by 0.2%. There were increases in the cost of furniture and soft furnishings while the prices of crockery and glassware, cutlery and acoustic appliances fell.
Other goods increased by 0.5% in May following increases in the prices of comics, magazines and books, paper products such as toilet paper and kitchen paper, detergents and cleaning equipment, cosmetics and hair applications.
Transport costs fell by 0.5% in May following a fall in the price of motor fuels and air and boat fares, while the cost of motor insurance rose marginally. The annual percentage increase in the year to May was 8.3% down from 9.9% in the previous month.
Services and related expenditure rose marginally in May by 0.4% with increases in doctors and dentists fees, hairdressing charges, entertainment, education and training while telephone charges fell.
Consumer prices increased by 0.7% in May to bring the overall CPI to 110.1. This compares to an increase of 0.5% in May 1999. As a result, annual inflation in the twelve months to May was 5.2% compared to 4.9% in April 2000. The main factors causing the monthly increase were increased mortgage payments, higher private rental costs and increases in food, tobacco and alcohol prices.
Consumer Price Index
TABLE 1 – FOOD
 TABLE 1 – FOOD (continued)
TABLE 2 – ALCOHOLIC DRINK
TABLE 3 – FUEL & LIGHT
  TABLE 4 – HOUSING
TABLE 5 – TRANSPORT
TABLE 6 – SERVICES AND RELATED EXPENDITURE
Dáil Éireann 522 Written Answers. Inflation Figures.