Dáil Éireann Debate, Thursday - 14 October 2004
108 Mr. Durkan asked the Minister for Finance if, with a view to obtaining a more comprehensive evaluation of inflation, he will consider including house and other prices in the CPI; and if he will make a statement on the matter. [24968/04]
Amharc ar fhreagraThe director general of the Central Statistics Office, CSO, has sole responsibility for and is independent in deciding the statistical methodology and professional standards to be used in compiling the consumer price index, CPI. The CPI is designed to measure the change in the average level of the prices paid by consumers for goods and services. It measures in index form the monthly changes in the cost of purchasing a representative basket of consumer goods and services.
The purchase of a house is an investment in a capital asset, purchased over a long period of time, that usually appreciates in value. It does not form part of consumption and so house prices are excluded from the index. The CPI does, however, include the current costs of housing, such as mortgage interest costs. These costs reflect not only changes in interest rates but also the increasing size of the average mortgage. Measurement of the latter takes into account the trend in house prices and as a result these price trends are taken into account, indirectly, in the index. Rental costs are also included in the CPI.
The latest CPI release shows the annual inflation rate in August was 2.5%. Inflation has averaged 1.9% in the first eight months of this year, compared to an average of 4.2% over the same period last year. The moderation in inflation is a very welcome development. In the Economic Review and Outlook, which was published in August, my Department forecast an annual average rate of CPI inflation of 2.2% for 2004 as a whole, down from 3.5% last year.
