Showing posts with label Irish consumer prices. Show all posts
Showing posts with label Irish consumer prices. Show all posts

Friday, February 27, 2015

27/2/15: Deflation and Retail Sales: Ireland 2015...


Deflation harms consumer demand?


So Irish retail sales are up 8.8% y/y in volume and 5.5% in value, implying people are buying on lower prices, not delaying buying for lower prices. And...

Irish consumer prices are shrinking (deflation).

Note, the above retail sales figures are reflective of total sales. Core sales, excluding motors were down 0.1% in value and volume m/m, but up y/y by 4.8% in volume and 0.9% in value.

More granular:

Friday, May 30, 2014

30/5/2014: That State-Sanctioned Inflation Tax...


There is much to be analysed in the Irish Retail Sales figures for January-April 2014, updated by the CSO this week. And I intend to do so on this pages at a later time.

But one thing jumps out: taking data for Q2 2014 to-date (in other words, looking at April performance), and comparing this against all previous Q2 data (monthly averages for April-June) gives a bit of a shocker:


Per chart above, since the onset of the crisis (from the peak) through today, both values of retail sales and volumes of retail sales have declined. With exception of food, these declines have been pretty sharp and despite some improvements in recent months, they remain sharp.

But, in all cases, across all broad categories of goods traded, retail sales have fallen more by value than by volume. This means that retailers have been selling less in terms of actual volumes of goods, but are receiving even less in terms of revenues for these goods sold. Of course this means two things:

  1. There is on-going deflation in those sectors where value declines are steeper than volume declines; and more importantly
  2. There are lower margins (and lower investment and hiring) in the segments where (1) takes place.
Yet, two segments of goods stand out from this picture: Bars and Automotive Fuel. In both, value of sales declined less than volume. In other words, less is being charged for these goods, but even less is being supplied. That is a signifier of rising cost of provision of same goods at retail level - or in plain terms - real, actual inflation. Now, both sub-categories are witnessing two sub-trends:
  1. Inputs costs in both are not rising at any appreciable rate (fuel inflation relating to oil prices is relatively low over time considered, and drink industry is seeing lower factory gate prices, not higher);
  2. Taxes on both are rising, at various stages of supply chain.
In other words, the chart above shows that in Irish economy, the inflation tax is being forced through heavily taxed sectors where the State extracts the lion's share of final cost of goods supplied to consumers.

The above also puts under serious questions the bars industry lobby claims that there is a need for high level minimum pricing on alcohol. Their sector, it appears, has been hit by a drop in demand and not by a drop in prices. In fact, if anything, ceteris paribus, their sector might benefit from lower prices - charging punters 7 quid per pint of domestic beer is not a good way to improve your sales, you know...

Tuesday, November 13, 2012

13/11/2012: Irish CPI v Euro Area: September 2012


In the previous post I covered overall dynamics of Irish consumer prices in October. Now, let's take a quick look at comparatives across the euro area. These are reported by the CSO with one month lag, so all we have is September 2012 year on year changes in prices. For comparative reasons, I also put y/y changes in prices for January 2012. The chart below shows the difference between Irish inflation and euro area overall inflation, with positive numbers signifying by how much Irish CPI changes in specific category exceeds euro area overall CPI changes for that category. Negative numbers show by how much euro area CPI changes exceeds Irish CPI changes.


Of notable trends/patterns:

  • Irish overall consumer price inflation HICP (2.4% annual in September 2012) was below that for the EA17 (2.6%) and below EU27 (2.7%).
  • Ireland also posted lower inflation in September in Food and-alcoholic beverages, clothing and footware, Furnishings, household equipment and maintenance, Health, Recreation and culture, and Restaurants and hotels.
  • Ireland posted identical (to EA17) inflation in Alcoholic beverages & tobacco.
  • Ireland's inflation was in excess of that for the EA17 in Housing, water, electricty, gas & other fuels, Transport, Communications, education (by a massive 9.3 percentage points) and Miscellaneous goods & services.
  • Higher inflation rates in Ireland have accelerated in September, compared to January in only two categories: Housing, water, electricity, gas and other fuels, and Education.
In annual terms, Ireland is now in inflation territory since August 2010, with the peak rate of 3.11% in April 2011 and the current rate running at 1.20% - a modest inflationary environment, which means that our nominal GNP, were it to post 0% real growth is expanding at the rate closer to 1% nominally - a massive under-shooting of the rate of nominal growth required to deflate our debt pile.

13/11/2012: Consumer Prices in Ireland: October 2012

Consumer price index for October 2012, Ireland released last week chows broad continuation of the previously established trends, namely above-average inflation in state-controlled sectors, albeit the overall rate of the state-sanctioned rip-off of consumers is now moderating relative to previous months.

Overall CPI index dipped to 101.5 (2011 base year) in October compared to 101.6 in September, representing a mom change of -0.1% and y/y rise of 1.20%. 3mo average through October is at +0.36% rise on previous 3mo period and is up 1.60% y/y.

Charts below illustrate:

One thing is clear from the charts above: despite the economy still in trouble, cost of living in Ireland is now at the levels comparable with those attained in early 2008.

Looking at decomposition by broad category:

  • Price index in Food & non-alcoholic beverages category rose from 100.6 in September to 101.0 in October. The index is now up 1% y/y and 3mo average through October 2012 is 0.7% above the same period average a year ago.
  • Alcoholic beverages & tobacco prices index is slightly down from 103.7 in September 2012 to 103.5 in October 2012, but the index is still up 3.5% y/y and index 3mo average through October 2012 is up 3.57% on the same period a year ago. The index annual inflation was driven primarily by rises in price sof cigarettes (+6.9 y/y) and Other tobacco (+7.9% y/y)
  • Clothing and footware sub-category index is up from 99.5 in September to 100.5 in October. The sub-index is now up 1.01% y/y and its 3mo average through October 2012 is 0.64% ahead of the 3mo average for the same period in 2011. Garments were the only sub-category of goods in this category that showed y/y inflation (+2%), with other sub-categories posting deflation.
  • In Housing, water, electricity, gas and other fuels category, prices index rose from 96.8 in September to 98 in October, the index is up 1.24% m/m and is down 3.26% y/y. 3mo average through October is down 2.41% on a year ago. Mortgage interest posted a robust 18.1% decline y/y, but this decline is distributed unevenly with adjustable rate mortgages rising in cost, whiel tracker mortgages benefiting from ECB easy monetary policies. Meanwhile, largest y/y increases were recorded in Electricity (+8.7%), Gas (+9.3%) and Liquid fuels (+13.4%).
  • Furnishings, Household equipment and routine maintenance sub-index is down marginally from 97.4 in September to 97.2 in October. The sub-index is down 2.70% y/y and its 3mo average through October is down 2.53% y/y. Nine out of eleven sub-categories of goods and services posted deflation y/y in October.
  • Health prices index moderated from 100.4 to 100.2 m/m in October and is up only 0.3% y/y with 3mo average through October up 0.47% y/y. In Health, largest price increases in October in annual terms were in Other Medical Products (+2.9%) and Other medical and Paramedical Services (other than Doctors' fees) (+3.2%).
  • Transport sub-index fell significantly from 109.3 in September to 106.3 in October (down 2.74% m/m). However, the sub-index is still up 5.77% y/y and 3mo average through October 2012 is now up 7.34% on the same period of 2011. In Transport, largest increases in prices, annually, were in Petrol (+12.4%), Diesel (+11.1%), Motor Tax (+10.8%), Bus Fares (+9.2%), passenger Transport by Sea and Inland Waterway (+5.4%) and Combined Passenger Transport (+6.2%).
  • Communications prices sub-index moderated from 97.4 in September to 96.6 in October, down 3.40% y/y and down 2.67% y/y in terms of 3mo average through October. here, Postal services went up in price 1.5% y/y, while Telephone & telefax equipment and services were down in prices 3.6% y/y.
  • Recreation and culture prices sub-index rose from 98.7 in September to 99.2 in October, with an annual inflation registering at 6.73%. 3mo average through October was up 8.63% y/y.
  • Education costs rose at a monthly inflation of 4.6%, up 6.73 y/y in October to 104.6, while 3mo average through October 2012 was up 8.63% y/y. In education inflation was primarily diven by Secondary education (+2.5% y/y), Tertiary Education (+6.5%) and Education not definable by level (+6.6%).
  • Restaurants and hotels price index  was at 01.6 in October, down from 10.2 in September but still up 0.99% y/y, same rate of inflation as 3mo average through October 2012.
  • Miscellaneous goods and services sub-category price index rose from 104.2 in September to 105.2 in October and is up 5.62% y/y, with 3mo average through October 2012 up 5.40% on the same period a year ago. Here, health insurance costs were up 15.9% y/y and insurance connected with transport was up 4.7% y/y. Other services inflation run at 22.8% y/y in October.

 In terms of historical rates of inflation, charts below show current price indices for all main categories of goods and services relative to 1976 and 2007 readings.





Friday, September 14, 2012

14/9/2012: 36 years of state-incentivised inflation?


Some historical (up to August 2012) charts on Irish CPI. Orange bars mark state-dominated categories of goods and services. Interpret these as you wish. Summary table at the end is pretty much self-explanatory:







14/9/2012: Irish CPI for August - detailed charts


With some delay, here's the analysis of latest Consumer Price Inflation data for Ireland for August 2012:

Summary table of monthly and annual changes
Note: I will blog on overall inflation trend separately in the next post.

Here are changes by sector, including notable changes by sub-sector.

Monthly inflation:


Big spikes are in:

  • Clothing and Footware +6.6%
  • Mortgage Interest -3.2% (although CSO does not separate the differences between the ARM and trackers, which have been moving in the opposite directions)
  • Transport +1.6% (Petrol up 3.5%, Diesel up 4.0%
  • Transport Services +0.5% driven by Air Transport (+1.0%)
Year on year comparatives are more revealing:


The above clearly shows that most of the inflation on annual basis remains concentrated in the state controlled sectors (either via regulatory price hikes or direct state taxation and charges effects or via semi-states hiking prices on their own). Note that even in the 'Other Services' category, the inflation is driven by household charge being added in April 2012.

The Government strategy is clear, albeit, unlike the previous Government, the current one stays away from openly declaring this: milk Irish consumers for every penny they got via higher charges and state-captured prices. In effect, much of the price increases not caused by direct state taxation are still a form of taxation as the Government collects higher VAT and other taxes on those goods and services, provision of which it controls via semi-state bodies.

Thursday, August 9, 2012

9/8/2012: Rip-off Ireland roars again in July

Latest consumer price indices are out for Ireland. Headline number for annual comparatives is moderate inflation at 2.0% in HICP metric and 1.6% on CPI metric. M/m we have deflation.

Alas, the headlines do not tell the whole story. Much is revealed in the following three charts which, in summary, show that most of inflation, including double-digit rampant inflation, is concentrated in state-controlled or state-set prices (marked in red).



You can see that even when it comes to energy, state-controlled prices (e.g. electricity and natural gas) are ahead of inflation driven by virtually identical underlying oil and gas prices (other hydrocarbons-linked fuels).

The above, of course is consistent with the State policies that have prioritized extraction of rents from the private economy in order to close fiscal gap. The State is doing this even though Irish Government is aware that we face a deleveraging crisis among our households and companies. In other words, prioritization of the policy is clear - skin consumers to save the Exchequer and to hell with households barely capable of making ends meet.

Don't think that this is not a prescription for an economic disaster. Killing off private economy to sustain public sector's lack of real reforms as well as to sustain exceptionally costly measures to underwrite Irish financial sector meltdown is not a good thing to do. But, hey, 'international investors' seem to approve.

Thursday, January 26, 2012

26/1/2012: Rip-off Ireland - Sunday Times, 22 January 2012

This is an edited version of my Sunday Times column from January 22, 2012.




Back in 2004, with much fanfare, Fine Gael launched its ripoff.ie campaign that highlighted a large number of cases where policy-related or regulated price structures and practices have resulted in our cost of living falling well out of line with other Euro area economies. In 2009, Fine Gael launched a policy paper that was supposed to end Rip-off culture, including in state controlled sectors, once and for all.

Fast-forward to today. Since elections, having abandoned its pro-consumer agenda, Fine Gael has done marvellously in playing a ‘responsible’ possum to Irish vested interests.

According to the CSO, year on year, consumer prices in Ireland rose 2.5% through December 2011. The range of these price changes across sectors, however, was dramatic.

Clothing and footware prices were up 0.4% in 12 months through December, Furnishings, Household Equipment and Routine Household Maintenance prices fell 1.9%, Recreation and Culture deflated by 0.6% and Restaurants and Hotels costs fell 0.9%. Health costs rose 2.6%, Transport by 1.6%, Education by 8.9%.

Majority of these price hikes have nothing to do with private firms ‘profiteering’. Per Purchasing Manager Indices, tracking the changes in input and output prices for goods and services, Irish firms and MNCs have experienced sustained shrinking of the profit margins since the beginning of the crisis, as consistent with deflation. Instead, the largest price increases, and ever expanding profit margins, took place in the sectors that, in the past, Fine Gael have correctly identified as being state-controlled parts of the Rip-off Ireland.

Food and non-alcoholic beverages prices are up just 5.9% in the last 10 years, cumulatively. State-controlled Tobacco prices are up 69.6% and Alcohol 21.6%. Housing, Water, Electricity, Gas and Other Fuels – single largest category of consumer spending – is up 64.4% on December 2001, with 90% increase in Energy Products costs, 63.3% increase in Utilities and Local Charges, and 99.1% increase in Mortgage Interest costs. In the last five years, Rents have fallen 8%, while Mortgage Interest rose 11.3% despite the fact that ECB rates have dropped 2.5 percentage points over the period. Electricity prices are up 28.3% in 5 years and 11.5% in the last year alone, despite the fact that natural gas prices – the main generation source for Irish electricity – have declined worldwide.

While Fine Gael cannot be blamed for the full extent of price hikes since 2001 or 2006, the current Government bears responsibility for failing to address state-controlled inflation since taking the office.

The above sectors are indirectly controlled by the state via regulation, state ownership of banks and enterprises, and indirect tax measures. But what about those costs more directly set by the Government?

Health costs are up 56.5% on December 2001, Education is up 81.5%. In Health, the core drivers of inflation have been Hospital Services (up 40.2% since December 2001 and 9.8% in 2011), Dental Services (up 20.6% in 5 years, but down 0.3% in the last 12 months). Meanwhile, prescribed drugs prices are down 11.3% on 2006 and 4% in the last 12 months. Health insurance costs are up 75.7% and 22.9% since December 2006 and in the last 12 months, respectively. This in a country with younger population and well-established trends in terms of demand for healthcare. In contrast, vehicles insurance – privately provided and similar in predictability of total claims risks – inflation since December 2006 amounts to just 9% and 0.9% in the last 12 months.

Same story of the state-led rip-off is replicated in the Transport sector. Here, overall costs are up 9.3% in the last 5 years, but bus fares are up four times as much. Privately controlled costs of buying vehicles have declined 15.4%, while state-set motor tax rose 14.3%. Ditto in Communications, where telecoms services costs are up 5.8% in the last 5 years, but postal services up double that.

In two sub-sectors of education where the Government has least power to influence prices – Primary Education and Other education and training – inflation is the lowest. The highest price increases are in the third level education, with prices up 50.1% in just 5 years (13.4% in last 12 months alone).

The above clearly shows that the Government and the semi-state bodies and enterprises it owns, along with the banks are at the heart of the extortion racket that is our cost of living. Over the recent years, rapid deflation in prices and costs in the private economy has been offset by the rampant inflation in prices and costs in the state-controlled and regulated sectors. In majority of cases, this inflation was directly benefiting state and semi-state employment, management and Government coffers. In all cases, the costs were directly impacting Irish consumers who are left with no meaningful choice, but to comply with the pricing structures set in the markets.

CHARTS:



Sources: CSO database and author own calculations

Meanwhile, Budget 2012 clearly shows that the Government is hell-bent on extracting ever-higher rents out of consumers through taxes and charges.

For example, the Government has introduced increased mortgage interest relief that amounts to €52 million in help for most indebted-households. But the very same Government refuses to intervene in the banks’ internecine policies of shifting the burden of losses from trackers onto the adjustable rate mortgagees. The households that the Government finds in the need of increased mortgage interest relief will be liable for the new Household Charge. And, if Minister Noonan has his way, mortgagees who default on their loans will pass into outright debt slavery to the banks.

There are more direct inflation-linked or inflation-raising taxes, such as VAT. Increase in the VAT rate simultaneously pushes up the overall tax component of all goods and services sold in the state that are taxable at the higher rate (an increase in inflation of some 9.5% for those items) and increases the costs of all goods and services that are dependent on intermediate inputs. Excise tax on tobacco comes against the Revenue Commissioners’ analysis showing that tobacco taxes have reached, even before Budget 2012 measures are factored in, the point where higher taxes harm receipts and fuel black markets. And Carbon Tax quadrupling from €5 per ton to €20 per ton has been responsible for some 2% rise in inflation in fuel and related activities. Motor tax increases, accounting for double the share in an average household expenditure that accrues to bus fares, are going to directly drive up the cost of transport.

Increases in State charges for hospital beds are expected to raise the cost of healthcare for middle class patients by some €268 million in full year terms. Health insurance levy hike further compounds this inflationary grab-and-run approach to policy. Secondary education ‘savings’ are likely to see parents being forced to cover much of the gap in funding out of their own pockets. Third level measures, while relatively modest in size, will compound massive inflation already accumulated in the sector over the last 5 years.

By the metrics of the Budget 2012, the current Government didn’t just mothball its pre-election ideas on reducing the reach of the State-sponsored Rip-off Ireland, it has actively moved to embrace the cost-of-living increases through indirect taxation and encouraging avarice of the semi-state commercial bodies and dominant near-monopolies. All of which means that the path to economic recovery we continue upon is the path of deflationary spiral in private sector economy, with mounting unemployment and businesses insolvencies, offset by the unabated cost increases when it comes to the meagre services the State does supply or control.


Box-out:
Following an almost 11% month on month decline in trade surplus in October, Irish exporters have posted a record-breaking return to health in November, bucking all expectations. The market consensus was for the Irish trade surplus (merchandise trade only) to decline marginally to ca €3.4 billion in November. Instead, the trade surplus rose – on seasonally adjusted basis – to €4.31 billion – the highest on record. In 11 months through November, cumulative merchandise trade surpluses now amount to €40.53 billion or 1.6% ahead of the same period in 2010. As before, the core drivers of trade surplus were exports increases in Organic Chemicals, and Medical and Pharmaceutical products, while indigenous exports rose significantly during the last year in Dairy products category. The latest data highlights the resilience of the Ireland-based MNCs’ exporting capabilities, providing continued contrast to the majority of our counterparts in the Euro area ‘periphery’ who have been posting dramatic slowdowns in exports and deepening trade deficits since the beginning of Q4 2011.

Thursday, January 19, 2012

19/1/2012: December Inflation - State's Fingerprints all Over the Crime Scene

There will be a much more detailed analysis of the state-sanctioned rip-off that is revealed in the latest data from CSO on Irish consumer prices in my sunday Times article this weekend, so stay tuned for that, but here are some numbers from today's release.

First off - changes yoy for 2010 and 2011:

And next, cumulated changes in prices for 2007-2011 period:
Lighter blue are categories that have either full or significant share of prices set or influenced directly by Government policies.

One thing to note: mortgage interest costs which, per CSO data have fallen 10.7% in 2007-2011. Of course, this conceals the fact that since the Irish State took over most of the Irish banking sector, in 2010-2011, mortgage interest costs are up cumulated 28.11%. Over the same period of time, ECB rates have moved from 1.0% in January 2010-March 2011, to 1.25% in April-June 2011, to 1.50% in July-October 2011, to 1.25% in November and 1.0% back in December 2011. In other words, the average rate has gone DOWN from 1.23% in 12 months pre-January 2010 to 1.13% in  24 months since then. And yet, mortgage interest keeps on climbing... up whooping 20.4% in 2011 alone.

Yet another useful comparative that is concealed by the above data is that while mortgage interest costs might be down 11.7% on December 2007, they are up 7.7% on December 2006. Now, in December 2006, ECB rate was 3.5% or 2.5 percentage points above where it was in December 2011.

So let's take a look at slightly longer horizons. Chart below show cumulated price changes between December 2001 and present and December 2006 and present also courtesy of the good folks of CSO.

Again, the same story - the higher the price increases, the more likely we are dealing with directly regulated or state owned enterprises-dominated or state-controlled sector. 

More detailed analysis in my forthcoming Sunday Times piece this week.

Friday, November 11, 2011

11/11/2011: Ireland's Consumer Prices: October

Irish CPI and HICP figures for October show continued pattern of public sector-controlled costs inflation and continued pressures on prices in the domestic economy. Here are the details.

Per chart above, Irish CPI rose from 104.4 in September to 104.7 in October compared to December 2006 when it stood at 100. Re-based to December 2001, October CPI was at 123.6, up on 126.2 in September. Mom CPI rose 0.3% and 3mo change is 0.8%. Annualized rate of change is now 2.8% - the highest since April 2011. All items CPI rose from 2.6% in September to 2.8% in October. 3mo MA is now at 2.53% and 6mo MA is at 2.62%.

Harmonized Index of Consumer Prices also increased 0.3% mom to 107.1 in October from 106.8 in September. A year ago, index reading was 105.5, so controlling for rounding yoy HICP rose 1.5% in october, up on 1.3% in September and 1% increases in July and August.


 CPI by household budget components was also worrying:

  • Food and non-alcoholic beverages prices inflation remained at 1.4% for the third month in a row, with 6mo MA of 1.17% and 3mo MA of 1.4%. In 3mo through October, average price inflation rose 50% on 3mo period through July.
  • Alcoholic beverages & tobacco remained in deflation of -0.5% for the fourth month running. 3mo MA is -0.5% and 6mo MA is -0.3, which means we are witnessing slightly accelerating deflation.
  • Clothing & footwear posted -0.3% CPI in October, same as in September, down from -1.2% deflation in August. 3mo MA is -0.6% and 6mo MA is -1.2%, so we are seeing some slowdown in deflation.
  • Housing, water, electricity, gas and other fuels posted another double-digit price increase of 10.2% in October, up on CPI of 8.9% in September. 3mo MA CPI is now at 8.77% and 6mo MA CPI is at 9.07%. Largest yoy increases in this category were: 20.5% increase in natural gas prices, 20.3% hike in liquid fuels prices, 18.1% increase in mortgage interest costs, 11.5% rise in electricity prices, and 6.9% price increase for bottled gas.
  • Deflation continued to build up in Furnishings, household equipment and maintenance category with CPI of -2.2% in October against -2.3% in August and September. 3mo MA is now at -2.27% and 6mo MA is at -2.37%.
  • As far as state-controlled sectors go, Health had another bumper crop year with price increases of 2.3% in October, against CPI of 3.4% in June-September. 3mo MA is at 3.03% and 6mo MA is at 3.42%. Hospital services drove inflation here with annual rate of price change of 9.8%. In contrast, pharmaceutical products prices are down 3.3% yoy in October.
  • Transport - another heavily state-controlled or dominated sector also posted robust inflation of 3.6% in October against 4.2% in September. CPI for the sector is now at 3mo MA of 3.67% and 6mo MA of 3.52%. Costs of purchasing vehicles have fallen 4.3% yoy through October, but costs of fuels and lubricants rose 14.5%. Rail transport costs are up 1.8%, Bus fares are up 10.0%, Air transport costs up 5.6% and Sea transport costs up 6.4%.
  • Communications CPI in October stood at 1%, same as in previous 2 months. 6mo MA is now at 2.08%.
  • Recreation & culture CPI posted -0.8% growth in October, more deflationary that -0.5% in September. 3mo MA is at -0.7% and 6mo MA at -0.65%.
  • Education CPI showed the buoyancy of the Celtic Tiger era with 6.5% increase in October on the foot of 12 previous months posting deflation. 3mo MA is now at 1.1% and 6mo MA at -0.1%. THe swing in CPI was a massive 8.1 percentage points. Virtually all inflation in the sector was accounted for by the third level education costs - up 13.4% yoy in October (+13.5% mom). Education costs now run +21.9% ahead of December 2006 level for primary education, +22.7% for second level education, +50.1% for third level education and only +4.7% for Other education & training.
  • Restaurants and hotels CPI came in at -0.9% in October from -0.8% in September. 3mo MA is at -0.8% and 6mo MA is at -0.65%. Accommodation services posted the largest deflation of -3.8% mom and -3.0% yoy, with Restaurants, cafes & fast-food posting deflation of -0.2% mom and -1.9% yoy.
  • In Miscellaneous Goods and Services category, the only notable changes were: 12.7% yoy increase in insurance costs, broken down into a massive 23.8% yoy rise in Health insurance costs, and 4.2% rise in Transport Insurance costs. Overall, this category costs rose 6.4% yoy in October and 0.5% mom


State-controlled sectors and prices inflation is now running at 1.15% in October, up on 1.03% in September. 3mo MA and 6mo MA for the series are both at 1.0%. In contrast, private sectors prices are rising at 0.51% in October down from 0.55% in September. 3mo MA for these prices increases is 0.50% and 6mo MA is at 0.56%



Cumulative gap between state-controlled sectors prices and private sectors prices from December 2007 through today now stands at 140.51%, up from 139.62% in September.


Thursday, October 13, 2011

13/10/2011: CPI for Ireland: September 2011

Consumer prices inflation is now running above 2.5% in Ireland and the usual culprits are to be blamed.


Consumer Prices in September rose +0.3% mom against a decrease of 0.1% recorded in September 2010. As a result, per CSO, "the annual rate of inflation increased to 2.6%, up from 2.2% in August 2011". Annual inflation is now running above 2% target every month since January 2011.

The EU Harmonised Index of Consumer Prices (HICP) for Ireland rose +0.1% in the month, compared to a decrease of 0.2% recorded in September 2011. The annual rate of HICP was 1.3% higher in September compared with September 2010. Annual HICP was running at 1% increases in July and August - the lowest rate of HICP in Europe.

Chart below illustrates:
All Items CPI is now in annual expansion since August 2010. Moderate rates of under 1.7% CPI were exhausted in January 2011 and since then we have entered the period of excessive inflation, especially compared with the overall stagnant domestic demand activity. This means that accelerating price increases are no longer acting to support economic growth, but are compressing already strained household budgets and increasing future pressure on interest rates. It is worth noting that ECB decisions on rates are based on HICP, not CPI, which means that with Euro area HICP at 2.5% in August and July, against HICP rates at or above 2.5% every month since April 2011, the rates direction should be up.

Pert CSO, the most notable changes in the year were:
  • Increases in Housing, Water, Electricity, Gas &Other Fuels (+8.9% in September 2011 which comes on top of 8.5% rise in a year to September 2010), Miscellaneous Goods &Services (+6.5%), Transport (+4.2%) and Health (+3.4% - unchanged mom but up yoy in September, against an annual rise of 0.5% in September 2010).
  • Decreases in Furnishings, Household Equipment & Routine Household Maintenance (-2.3%) and Education (-1.6%).
  • The annual rate of inflation for Services was 3.6% in the year to September, while Goods increased by 1.3%.
The most significant monthly price changes were:
  • Increases in Clothing & Footwear (+5.4% - mostly due to seasonal effects) and Housing, Water, Electricity, Gas&Other Fuels (+1.7% - mostly due to mortgages interest costs rising +3.1%mom, liquid fuels (i.e. home heating oil) costs up +1.7%, electricity (+1.6%)).
  • Decrease in Transport (-0.7% - primarily due to decreases in airfares which fell 16.9%. Increases were recorded in bus fares (+8.8%), bicycles (+0.4%) and petrol (+0.3%)).

Charts below illustrate:


Charts below detail the rising gap between state-controlled prices and overall CPI as well as the gap between state-controlled prices and private sector prices:


Thursday, August 11, 2011

11/08/2011: CPI for July 2011


CSO reported Consumer Prices for July today. Here are some headline numbers and updated charts:
  • As measured by the CPI, remained unchanged in the month of July relative to June. There was also no mom change in July of last year. CPI index stood at 103.9 in June and July 2011 relative to December 2006 base and 122.7-122.7 relative to December 2001 base. This compares to index readings of 101.2 in June and July 2010 (2006 base) and 119.4 (2001 base).
  • As a result of the above monthly movements, the annual rate of inflation remained unchanged at 2.7%.
  • The EU Harmonised Index of Consumer Prices (HICP) decreased by 0.2% in the month, compared to a decrease of 0.1% recorded in July of last year. July 2011 HICP index stood at 106.5, down from 106.7 in June, while July 2010 index was 105.4, down from June 2010 reading of 105.5.
  • The annual HICP inflation was 1.0% in July 2011 relative to July 2010.
  • All items CPI, therefore is now running at 2.7% for the third month in a row, down from 3.2% in April 2011. A year ago, All items CPI was showing deflation of -0.1% and July 2010 was the last month of annual deflation in the current crisis period.

The most notable changes in the year were increases in
  • Housing, Water, Electricity, Gas &Other Fuels (+10.3%) - with significant (over 10%) weight in household spending basket. Increases in this category were led by mortgage interest cost hikes which are now 25.2 up on last year and were 2.3% higher than a month ago (please note, our Financial Regulator and the Gov are not making any concerned statements about mortgages interest costs, while talking about the need to restore lending to the corporate sector). In addition, Electricity is up 4.6% annual, while liquid fuels are up 20.1%. Once again, no concern from the Government, whatsoever, on the issue of these costs increases.
  • Miscellaneous Goods &Services (+7.2%), driven primarily by hikes in Health Insurance (+21.4% yoy and 0.1% mom). Overall Insurance services costs are now 14.5% up yoy, but down 0.3% mom.
  • Transport (+3.5%) - also with >10% weight in expenditure basket. Transport costs were primarily driven by 12.8 annual inflation in Fuels & lubricants sub-category (led by 12.6% annual hike in Petrol and 13.7% hike in Diesel), and Transport services (+7.7% yoy and 3.8% mom) where Air transport prices were up 25.0% yoy (+11.8% mom) and Sea transport (+12.5% yoy and 13.3% mom)
  • Health (+3.4% annual, although there was a decline of 0.1% mom). In this category, Medical products, appliance and equipment sub-category was up 1.4% yoy and down 0.2% mom, while Outpatient services declined 1.1% yoy and 0.1 mom. The real inflation here comes from the Hospital services, where costs are up a massive 9.8% yoy although there was no change mom. Again, I am yet to hear any real concern from the Government on this matter.
There were decreases in:
  • Furnishings, Household Equipment & Routine Household Maintenance (-2.9% - marking 43rd month of annual decreases in prices in this category, starting from January 2008)
  • Education (-1.3% - 10th consecutive monthly negative annual reading, by no change in mom inflation), although Primary education costs were up 1.3% yoy, while Secondary education costs were up 0.8% yoy
  • Clothing & Footware (-0.7% - marking 43rd month of annual decreases in prices in this category, starting from January 2008) and
  • Restaurants and Hotels (-0.7% - 26th consecutive monthly negative reading).

Inflation in the state-controlled sectors (sectors with either significant presence of regulated semi-state companies and/or state providers - e.g. education - or with significant shares of taxation measures relative to prices of goods and services - e.g. Alcohol Beverages & Tobacco) was running still ahead of private sectors inflation, with state-controlled inflation running at 1.02% annually, against private sectors inflation running at 0.53% in July. Both measures are down on June readings of 1.04% and 0.57% respectively.

Per CSO, "The annual rate of inflation for Services was 4.0% in the year to July, while Goods increased by 1.0%."

Saturday, March 19, 2011

19/03/2011: Retail sales & Consumer confidence



In the previous post I suggested that the latest inflation figures do not bode well for 'growth-linked inflation, but signal instead the worst kind of inflation - inflation that is driven by either imports or regulatory factors. Here's more evidence - consumer confidence and retail sales figures:
Larger markers in the above chart show February values - clearly, no sign of demand drivers for price increases anywhere in sight here. Same holds for consumer confidence as a driver.

Thursday, October 14, 2010

Economics 14/10/10: Rip-off Ireland is roaring its ugly head

CPI for September is out... kinda out... it was sent out yesterday without an embargo, by mistake, and now it was re-released again.

So the headline figure is: +0.5% yoy gain in CPI and -1.0% yoy loss in HICP. Mixed bag, you'd say. By one measure (CPI) it looks like things are getting back to a (positive) normal, while by HICP reading we are still in the (crisis) normal.

But let's take a closer look at decomposition of price changes. Per CSO, the most notable changes in the year were:
  • increases in Education (+9.5%),
  • increases in Housing, Water, Electricity, Gas & Other Fuels (+8.5%) and Communications (+2.9%) [Note: monthly CPI ex mortgage interest decreased by 0.2% in the month and was down by 0.9% in the year], and
  • decreases in Clothing & Footwear (-7.4%), Furnishings, Household Equipment & Routine Household Maintenance (-3.7%) and Alcoholic Beverages & Tobacco (-3.1%).
The annual rate of inflation for Services was 2.1% in the year to September, while Goods experienced continued deflation of -1.6%.

The most significant monthly price changes were:
  • decreases in Transport (-1.6%) - driven by airfares drop (not by the state-controlled bus and train fares, mind you) and
  • decreases in Miscellaneous Goods &Services (-0.4%) - primarily due to cuts in health insurance charges;
  • increase in Clothing & Footwear (+4.5%).
Per CSO: "The CPI excluding tobacco index for September decreased by 0.2% in the month and was up by 0.4% in the year. The CPI excluding energy products fell by 0.2% in the month and decreased by 0.2% in the year. "

So good news then is that:
  1. State services, such as Education (+9.5% ! in 12 months);
  2. Banks payback to consumers for propping them up (CPI is up +0.5% yoy and ex-mortgages CPI is down -0.9% over the same period. So far, we have had, courtesy of our banks rescue plans: in a year to September 2009 mortgages costs fell 48%, in a year to September 2010 they rose 25.1%. All despite the fact that Irish banks are no longer facing higher costs of funding - instead they are simply borrowing from ECB using our bonds, for which you, me and our kids will be liable);
  3. State-set charges on energy (+8% yoy);
  4. State set health costs (+0.5%);
  5. Largely state-set or influenced transport costs (+1.4%)
are all signaling that we are living in a public sector boom times, as the Government seemingly pushes forward with the agenda of beefing up semi-states revenues at our expense.

Clearly, we've turned another corner, folks, and it's the 'Ugly Boulevard' ahead of us, consumers.

Friday, October 1, 2010

Economics 1/10/10: Retail sales data

Oh, let's cut the bull, folks. The retail sales data is making rounds the banks 'economists' notes with all the hoopla of the 'positive news' arguments. So things are turning corners?.. Actually, not really.

With motors:
  • Value of sales rose 1.3% mom in August and a re down 1.7% yoy;
  • Volume of sales was up 1.1% mom and 1.3% yoy

Conclusion, with motors included, we are still selling more stuff at ever-lower prices, though this time around declines in prices did not outpace increases in volume. Which means that no jobs are being created. If we take on board the fact that Euro remains relatively weak compared to last year vis-a-vis our main trading partners outside the Euro zone, implying we are buying imports at a higher price, the margins in retail sector gotta be shrinking even more than the volume/value gap above suggests. Which, in turn, implies that there aren't any new jobs being created in the retail sector on the back of the latest 'turnaround'. The whole thing about 'great news on retail sales front' is a damp squib.


And if you want to see even deeper into the official spin, take a look at ex-motors retailing:
  • Value of core sales was flat mom in August and is down 3.6% yoy;
  • Volume of core sales was up 0.2% mom and 1.4% yoy
So declines outpacing volume increases is clearly operative here.

Dig deeper and take a look at the breakdown of sales across main business lines.
  • The largest increases in value took place in Books, Newspapers & Stationary (+4.7%). Given all the great news we've heard about Ireland in August, this is hardly surprising.
  • Second largest value increase (ex-motors) mom took place in... errr... Fuel (+4.5%). That wouldn't be an indicator of our consumer confidence in the future, but the price increases in the sector where prices are controlled by the Government.
  • Durables continued to tank: Electrical goods (-3.2% value and -2.5% volume mom), Furniture and Lighting (-1.% and -0.7% respectively) - again, not a great sign.
The worst part of this data is that it continues to show that there is no restart to household investment in sight. Before the households begin investing, they will usually start consuming more durable goods. This is clearly not happening.