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People working from home won’t escape continued price hikes, the economist warns

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A leading economist predicts the current spiral of inflation, which has seen prices soar over the past month, will worsen as people on low and fixed incomes and those who are housebound – including those working from home – flee working from home – will feel the greatest pain from rising energy prices.

Ustin Hughes, a senior economist at KBC Bank, said the 6.7 percent rise in the consumer price index (CPI) in March compared with the same period last year marked the steepest rise in inflation since November 2000.

But he said things could get a lot worse thanks to the ongoing war in Ukraine, which has led to a sharp rise in fuel costs as well as global shortages of commodities like flour and sunflower oil, which are exported from Russia and Ukraine .

He predicts that the monthly inflation rate could reach 8 percent in the coming months – with energy prices – which have risen by 43.8 percent over the past year – not likely to fall significantly in the near future.

“If the war ended tomorrow we would have a drop, but in 10 years oil prices will be higher,” he said Independent.ie.

The CPI’s 1.9 percent surge between this February and March — the strongest single price rise since records began in 1997 — is a harbinger of things to come, he said.

“This suggests that inflation momentum is still building, and with recently announced increases in electricity and gas prices yet to be reflected in this data, it points to inflation readings in the 8 percent range over the next few months there.

“The problem of Ukraine – this is a harbinger of further increases,” he said.

While significant increases in fuel use — not fully reflected in the CSO’s latest figures — are up more than 40 percent year-on-year, the monthly cost of heating oil at home rose 58.5 percent — which is 126, PC is up 6 percent over the past year — those who are housebound — such as pensioners, housewives, the unemployed and people who are ill or working from home — will be hit hardest, he said.

This is especially true for people who live outside of urban areas and whose only source of heating is oil as opposed to natural gas, he said.

“It’s the rural communities and people whose budgets are being stretched more by necessities,” he said.

“It’s those with lower incomes who are housebound and spend more time at home. The reality is that if you bought heating oil in the last month, your inflation rate is in the double digits.”

And even those with more disposable income and who can still afford to travel will feel the effects of the crisis, as rising fuel costs have seen airfares rise an average of 69.2 percent compared to the same period last year. The cost of hotel accommodations also rose 13.7 percent from March 2021, while prices for restaurants and bars also rose nearly 3 percent (2.6 percent) year-on-year.

“Most people get hit in one form or another,” he said.

And while the prices of staples like flour, pasta and cooking oil have risen due to the war in Ukraine, overall food prices have risen about 3 percent, although they will continue to rise, he predicts.

While we all need to eat, he said the only saving grace is the fact that there is a lot of competition in the Irish food retail market.

“We have intense retail competition and that will limit pricing somewhat. You will have competition that will curb price gouging,” he said.

However, there’s no denying that borrowing costs are likely to rise, which is bad news for people paying off mortgages, he added.

“The worse news is that the central bank takes a dim view of runaway inflation and borrowers are likely to face a hike in mortgage rates,” he said.

“Markets are now anticipating that the ECB could hike rates three times by the end of this year and by a similar amount next year,” he added.

But the latest CPI numbers aren’t all grim, he added.

The cost of clothing and shoes and education fell slightly by 0.8 percent compared to March 2021.

Fiscal filings for the first quarter of 2022 also suggest that public coffers could post a modest surplus this year, suggesting “leeway for a two-pronged approach, with some sort of mini-budget in the months ahead meanwhile, more ‘relieving’ Measures Provided The Budget 23 package presented in October will provide an opportunity to provide more targeted anti-inflation initiatives,” he said.

And for consumers who are under pressure, he said, because the rising costs are out of our hands, “people can only try to adapt their behavior as much as possible,” he said.

For many people, this means wearing extra sweaters and turning down the thermostat or not going on vacation or dining abroad.

“The circumstances are very different,” he said.

“But for some it means the monthly income doesn’t expand, there’s no elasticity,” he said.

shopping basket

The following CSO basket shows the average national prices paid for everyday items in February 2022.

Diesel per liter – €1.65

Unleaded petrol per liter – €1.75

White self-raising flour 2kg – €2.08

Spaghetti 500 grams – €1.17

Sirloin steak per kg – €14.25

Lamb whole/half leg per kg – €14.23

Ham fillet per kg – €5.68

Whole milk 2 liters – €1.79

Irish Cheddar Cheese per kg – €9.11

Large Half Dozen Eggs – €1.79

Butter per pound – €3.14

Potatoes 2.5 kg – €3.37

Lager 50cl can – €2.17

Cigarettes 20 premium brand €15.30

https://www.independent.ie/irish-news/people-working-from-home-wont-escape-ongoing-price-rises-economist-warns-41531991.html People working from home won’t escape continued price hikes, the economist warns

Fry Electronics Team

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