The latest flash estimate for the harmonised index of consumer prices (HICP) showed that inflation in September was down by 0.2pc from August, however, and the annualised figure is something of a statistical glitch.
Anthony Dawson, of the Central Statistics Office (CSO), pointed out that prices between August and September 2024 fell by 0.8pc. This created a low base, and is an important factor behind the annual increase of 2.7pc.
“Looking at the components of the flash HICP in Ireland for this September, energy prices are estimated to have decreased by 0.3pc in the month and increased by 1pc since September 2024,” Mr Dawson added.
There was an annual increase of 2pc in the inflation rate for the eurozone in the same period. This is the European Central Bank’s target, and explains why its governing council decided to leave interest rates unchanged at last month’s meeting.
Irish food prices are estimated to have decreased by 0.2pc in the last month but are up by 4.7pc in the last year, according to the latest data.
Transport costs decreased by 1.6pc in the month, and rose by 1.5pc in the 12 months to September.
A new forecast by EY, the global professional services firm, is for headline inflation in the Republic to settle at 2pc both this year and in 2026.
According to the analysis, while the increase in food prices will put upward pressure on the inflation rate, the sharp appreciation in the euro will work in the opposite direction.
The Irish economy is navigating current complexities from a position of strength
EY said economic growth is in prospect in the Republic and the North both this year and next, with higher employment and strong tax receipts, as the global uncertainty over US president Donald Trump’s trade policy has less effect than feared.
Exports and GDP were boosted in the first half of the year mainly due to frontloading in advance of the introduction of tariffs, and that has been unwinding since the summer.
“Looking past these distortions, it’s clear the domestic economy is holding its own, with consumers spending apace and the number of people in employment posting a fresh high,” EY’s forecast said.
“Growth momentum is likely to soften in the period ahead, however, as households and businesses adapt to the changing external environment.
“So, after rising by 9pc this year, EY expects GDP to increase by 3.3pc in 2026.”
Modified Domestic Demand, a more relevant yardstick for Ireland as it takes out the warping effects of multinationals’ exports, is expected to grow by 3.2pc this year and by 2.6pc in 2026. EY is projecting employment growth in the Republic of 2.2pc this year and 1.8pc next year, and for the unemployment rate to increase up to 4.8pc in 2026, which it points out is low by historical standards.
Dr Loretta O’Sullivan, EY Ireland’s chief economist, said: “The Irish economy is navigating current complexities from a position of strength.
“The labour market is healthy, which is an important confidence factor for consumer spending, and additional funding for public capital projects will support investment over the coming years.”
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