Dáil Éireann díospóireacht -
Tuesday, 10 Dec 2002

Vol. 559 No. 1

Written Answers. - Price Inflation.

Ruairí Quinn

Ceist:

96 Mr. Quinn asked the Minister for Finance the projected level of inflation for 2002 based on the latest information available to his Department; the way in which this compares with the projected EU average; if studies have been undertaken to determine the reason inflation here is so significantly ahead of the EU average; and if he will make a statement on the matter. [25567/02]

Minister for Finance (Mr. McCreevy)

The latest inflation projection published by my Department was included with the budget documentation. It estimated that inflation, as measured by annual changes in the consumer price index or CPI, would average 4.7% in 2002. The latest available data, which refer to October, show an annual CPI inflation rate of 4.6%.

In terms of EU comparisons, the appropriate measure is the EU harmonised index of consumer prices or HICP. On this basis, Irish inflation is also projected to average 4.7% in 2002. The latest EU Commission forecasts – autumn – project an inflation rate of 2.1% in the EU this year.

My Department closely monitors the level of inflation and its causes. Irish inflation is higher than the EU average for a number of reasons. These include strong services sector inflation, which is currently running at around 7%-8% compared to goods price inflation of about 2.5%. This higher level of services sector inflation reflects high levels of wage increases and inadequate levels of competition in some areas.

It is important that cost pressures are not allowed to lead to deteriorating competitiveness which would result in higher unemployment. This is why wage moderation, and cost moderation more generally, are so important.