Consumer prices continued to rise last month, with the annual rate of inflation climbing to 3%, the highest level since October 2008.

 

The inflation rate, which has been rising steadily for the last 18 months, was 2.2% in February.

Compared with February, prices rose by 0.9%. Some of the main factors in the increase were higher mortgage repayments, an increase in the cost of home heating oil and rises in petrol and diesel prices.

The EU harmonised measure of inflation - which excludes mortgage repayments - rose by a more modest 0.5% in March, giving an annual increase of 1.2%.

A breakdown showed that clothing and footwear prices rose by 4% during March, as prices continued to recover from the winter sales, while mortgage interest costs jumped 6.9% as banks raised interest rates. Mortgage costs are now up 28.6% over the year. But rents fell 0.7% during the month.

The price of home heating oil climbed by 7.1% during March, while transport costs rose 1.4% due to increases in petrol and diesel. Petrol prices were up 3.2%, while diesel rose 4.7%. Over 12 months, petrol prices are up 16.8%, while diesel has climbed by 22.4%.

But prices in the alcoholic drinks and tobacco dropped 0.8% in March, due to lower prices for beer, wine and spirits in off-licences and supermarkets.

Economists see some domestic price pressures

Ulster Bank economist Lynsey Clemenger said that while the effect of higher mortgage rates on inflation was expected, increases outside this area were also notable.

She said a measure of 'core' inflation, while still subdued at 1.1%, has been moving higher in recent months. The economist added that the inflation gap between Ireland and other euro zone countries was narrowing, and moving in the wrong direction from a competitiveness point of view.

Goodbody economist Juliet Tennent said that while there were price pressures in some areas of the domestic economy, these remained weak in sectors exposed to consumers, such as recreation and culture and restaurants and hotels.