Saturday, March 19, 2011

19/03/2011: CPI update for February 2011

Some belated data charts updates. Irish CPI:
The chart above shows the uptick in February CPI (up 0.9%mom and 2.2% yoy) and HICP (up 0.9% mom and 0.9% yoy).

Annualized rates below:
Should we read this as a welcome catch up of prices due to demand changes or due to factory gates tightness? Not really. Take a look at components:

Housing, Water, Electricity, Gas & Other Fuels up +9.5% yoy, Miscellaneous Goods & Services +4.8%, Health +4.1% and Transport +3.5%. Deflation continued in Clothing & Footwear -4.6%, Education -2.9% and Furnishings, Household Equipment& Routine Household Maintenance -2.6%.

Food & Non-Alcoholic Beverages prices were up +0.7% mom and +1.2% yoy to February 2011. This compares to deflation of -8.0% yoy in February 2010. Mom, food prices increased by 0.7% while non-alcoholic beverages prices increased by 2.0%. So we know it wasn't the commodities prices inflation that drove our food prices. Especially since commodities-linked prices of bread&cereals deflated by -3.8%, other milk products -0.9%, other cereals -0.7%, cheese -0.6% and margarine & low fat spreads -0.5%, while butter rose +3.8%, preserves by +15.3%, as sweets and chocolate fell 1.3%. And so on... all over the place, really.

Housing, Water, Electricity, Gas & Other Fuels costs increased by 0.5% mom and by 9.5% yoy. There was a decrease of 10.6% yoy to February 2010. Mom, prices rose for liquid fuels (i.e.
home heating oil) +2.7%, materials for maintenance & repair of dwelling +1.5%, rents +1.0% and bottled gas +0.5%. A price decrease was recorded for mortgage interest -0.1%. But wait, yoy rents rose 0% and mortgage interest rose 20.3%. Clearly, credit crunch is raging for homeowners. One of the core remaining construction-related sub-sectors still standing is maintenance & repair of dwelling. This was down 0.1% yoy in terms of materials, but a significant -5.5% in terms of services - so work wages are down, but inputs on materials side is basically flat. Materials were up 1.5% mom and services were flat in February 2011. Given we import much of the former and retain domestically much of the latter, the news of overall monthly inflation in this category is really not good for Irish economy. We got the wrong end of inflation, folks - inflation that undermines our real incomes without supporting new jobs!

Electricity, gas and other fuels were up 10.5% yoy as a category, electricity up 3.2%, natural gas double that at 6.4%, liquid gas up 37.3% yoy. Again, wrong inflation for growth and much of it is due to changes in taxation structures, state companies surcharges and so on.

Health is a standout in the above chart. Down 0.6% mom but up 4.1% yoy. No need to explain why the cost of hospital services rose 11.5% - say 'Thanks' to our semi-state insurance company policies and the Budget, but not for the insurance prices increases - those are in the Miscellaneous Goods & Services where health insurance rose a massive 17.6% yoy and 14.4% mom.

Now - my exclusive - as usual, the breakdown of inflation by state v private sectors:
Or cumulative Rip-Off Government Policies effects:
Yet another legacy of the Social Partnership folks - as the Big Domestic Business (aka semi-states), State Quangonoids and Unions - the Real Golden Circle - take another bite at the economy's pie. The real economy is still on the edge of continued deflation (+0.1% mom), while the surreal Social Partnership-controlled economy is roaring ahead with 1.04% mom inflation, to 2011 fat bonuses. Happy times, as Borat would put it.
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