THE rate at which the cost of living is falling continued to ease last month as a stockbroking firm claimed the economy was turning a corner.
A report on consumer prices showed charges for running a home and business saw the largest out of a small number of increases as Goodbody revised up its forecasts for growth.
The investor firm said it expects the economy and consumer spending to be flat this year before picking up early next year. The Central Statistics Office (CSO) said overall high street prices have fallen 2.1% in the last year. It reported consumer prices up by 0.2% last month compared to a 0.8% decrease for the same period last year, with transport, housing, water, energy, fuel, alcohol and tobacco rising by slight margins.
But Avine McNally, Small Firms Association director, warned that many businesses were suffering with day-to-day running costs being hit by small but continued rises.
“Firms are facing high business costs every day,” she said. “Whilst small Irish businesses have taken a series of actions to regain cost-competitiveness within their own businesses, many costs remain outside their control as they are government-administered costs. When government sector administered costs are passed on to the rest of the economy, competitiveness deteriorates and jobs are lost. Our inflation rate remains a key component in regaining lost competitiveness.”
The Goodbody report said it expects the CSO to back its assessment when the next set of national accounts are published in the summer. It forecasts flat GDP this year, up from -1%, and growth of 1.3% next year.
Dermot O’Leary, the stockbroking firm’s chief economist, said the data his company was analysing offered a pleasant surprise. “Our initial view was that we would see an export-led recovery around the middle of the year, but recent data has provided a pleasant surprise, showing that the expected export-led recovery began in the first quarter, much earlier than anticipated,” Mr O’Leary said.
“The next question is what type of recovery will emerge. Given that it will be led by exports, it is unlikely to be employment intensive, but the earlier stabilisation in consumer spending will help in this regard.”
Goodbody warned, however, that the economy still faces many challenges including meeting its commitments to budget cuts, bank recapitalisation and improving competitiveness.
