Food and motor fuel hikes will keep costs high despite the rate of inflation easing

Food prices continue to rocket even as new “flash estimates” show the inflation rate in May fell to 5.4pc.

This is down on the 6.3pc figure recorded for April, according to the Central Statistics Office.

Energy prices and transport costs fell in the month. But food prices continue to shoot up, keeping pressure on household budgets. Annual food inflation has been recorded at 12.5pc for May.

The price squeeze will continue with petrol going up by 6c per litre and diesel increasing by 5c per litre this month.

It comes after the temporary reduction in the excise duty – put in place in March last year to help motorists cope with the surge in fuel costs – comes to an end.

On September 1, rates will increase by 7c for petrol and 5c for diesel. And on October 31 rates will be fully restored with an increase of 8c for petrol and 6c cent for diesel.

It comes at a time when diesel and petrol prices had fallen to their lowest levels since September 2021.

Chairman of the Consumers’ Association of Ireland Michael Kilcoyne urged Finance Minister Michael McGrath to reconsider the move to restore the full rates of excise duty on petrol and diesel.

“I am calling on the minister to reconsider this because it is penalising people,” he said.

He said the restored rate of excise duty could add €10 to the cost of a full tank of fuel.

Economist Austin Hughes said the fact the inflation rate was down marginally while prices of food and motor fuel were rising, underscored that the reality for people was not fully reflected in the figures.

“I think it underlines the difference between the recorded inflation rate and the reality that prices are still going up,” he said.

The flash estimate of the EU Harmonised Index of Consumer Prices (HICP) for Ireland rose by 0.3pc in May, to take it to an estimated 5.4pc when compared with the same month last year.

Energy prices are estimated to have fallen by 3.1pc in the month but were still up by almost 2pc over the 12 months to May.

Food prices are estimated to have increased by 0.4pc in the last month but are up by 12.5pc in the last year.

This is despite a number of the major retail chains reducing the cost of their own-brand staples such as milk, bread and butter in the past few weeks.

Food prices are currently increasing faster than other goods and services.

When energy and unprocessed food is excluded to get so-called core inflation, the figure came in at 5.7pc for May when compared with the same month last year.

CSO statistician Anthony Dawson said transport costs fell by 1.3pc in the month and were down by 1.4pc in the 12 months to May 2023.

Austin Hughes said the drop in the preliminary Irish inflation figure for May was welcome.

“Encouragingly, food prices rose a good deal less than of late but this still means dearer grocery bills,” he said.