Recent trends in Ireland show services inflation slowing, which is not the case in the eurozone. Photo: PA
Recent trends in Ireland show services inflation slowing, which is not the case in the eurozone. Photo: PA
Retailers, real estate firms, entertainment activities and hairdressers saw a January boost as both the value and volume of services sales rose.
The value of services increased by 3.2pc compared to December last year, while the volume increase was even higher at 4.5pc in the month, the Central Statistics Office said.
Wholesalers and retailers saw the biggest jump in value terms in January, rising 7.5pc compared to December.
Other service activities - including real estate, gambling, sports, household repairs and hairdressing - recorded the largest monthly volume increase, at 4.7pc, and were second-highest in value terms, up 6.4pc.
In the year since January 2022, the value of services output was 18.9pc higher and the volume of activity was 15.1pc higher, with accommodation and food seeing the biggest yearly surge on both counts – likely due to many services being restricted last year due to the pandemic.
While a services boost is good news for the local economy, experts have warned that services inflation can prove ‘sticky’, leading to higher core inflation and interest rate rises.
Recent trends in Ireland show services inflation slowing, which is not the case in the eurozone.
The Central Bank of Ireland said this week that government supports and pandemic disruptions lowered services prices in the second half of last year, particularly for public transport.
The bank predicts services inflation will slow from 4.7pc last year to 3.6pc in 2023. It also cut its forecast for headline inflation, as it believes price hikes have reached a peak.
A buoyant services sector, along with high household savings - which are still double pre-pandemic levels - will help drive consumption this year, the Central Bank predicted, helping to lift its growth forecast for modified domestic demand - a proxy for the local economy - to 3.1pc this year.
But the bank said that wage rises are a particular concern in the services sector across the EU, a factor that could keep underlying or core inflation - a measure of price hikes that strips out volatile energy and food - “elevated”.
European central bankers meet next Thursday, where a half-point rate rise is almost certain and may not be the last before the summer.
A Bloomberg survey of economists sees the ECB taking rates 0.75pc higher after next week in three separate quarter-point hikes.
The bank’s main lending rate is currently at 3pc, with its main deposit rate at 2.5pc.
The chair of the US Federal Reserve, Jerome Powell, has also indicated that he is not done hiking, telling a Senate committee this week that the “ultimate level of interest rates is likely to be higher than previously anticipated”.