The annual rate of inflation climbed to 5.2% in January, according to the Central Statistics Office. This is the highest level for almost six years.
The rate compares with 4.9% in December but is not as high as some economists had expected. Prices actually fell 0.1% in January compared with December, mainly due to a 14% drop in clothing and footwear prices because of the January sales.
Higher electricity prices and mortgage repayments - due to higher interest rates - partially offset the clothing and footwear fall. Spirits, cigarettes and wine prices also rose.
A breakdown showed that the annual inflation rate for goods was 0.6%, while for services it was 9.1%. The inflation rate as measured by the EU harmonised index of consumer prices fell to 2.9% from 3% in December.
Separate CSO figures showed that wholesale prices increased by 1.1% in January from December. Despite this, the annual rate showed a decrease of 0.4%. The main factor in the monthly rise was a 4.1% jump in chemicals prices.
Ulster Bank economist Pat McArdle said the 5.2% rate now looked like being the peak for the year, but the average for 2007 would still be well above last year's 4%. He said the rate would have been higher but for an unusually high post-Christmas sales effect.
IIB's Austin Hughes said the main drivers of Irish inflation recently had been a small number of specific items such as mortgage repayments rather than generalised price pressures. He also expected inflation to ease in the months ahead.
Davy Stockbrokers said the December ECB rate hike had had a bigger effect than usual because of a re-weighting of the CPI. As a result, Davy upped its average forecast for the year to 4.2%, but pointed out that the HICP would average only 2.3%. Davy believes this is a better measure of inflation.
ICTU general secretary David Begg said there should be immediate action at official level on curbing inflationary practices. He cited recent electricity price hikes, which he said were higher than sought by the ESB and 'had been granted by the energy regulator in a bizarre attempt to lure the private sector into the energy generating sector'.
IBEC's Danny McCoy said housing was accounting for half of the increase, and the increased weighting would put Ireland at a disadvantage by emphasising a different measure from the rest of the EU.
ISME chief executive Mark Fielding described the inflation increase as disastrous for the economy. 'While external factors, including interest rates and energy costs have certainly influenced the headline rate of inflation, there is absolutely no doubt that domestic factors, in particular state controlled costs, are the root cause of rocketing cost increases,' Mr Fielding said.
