Inflation has returned to recession-hit Ireland after 19 months of price falls, but business leaders complained Thursday that their key government-controlled costs have kept rising throughout the deflationary period.
The Central Statistics Office said average prices rose 0.2 percent over the year up to August, ending 19 straight months when prices slid in line with Ireland’s debt and banking crisis.
Economists said they expected Irish price gains to remain weak given the government’s plans to keep slashing its budget deficit by €3 billion ($4 billion) in the coming year through spending cuts and tax rises.
Prime Minister Brian Cowen has pledged to restore Ireland’s deficit spending to within 3 percent of GDP by 2014.
It is currently forecast this year to hit somewhere between 11 percent and 20 percent, depending on whether the cost of the nation’s bank-bailout program is included.
Business leaders warned that they never experienced declining costs, because their key expenses — including utilities, fuel, local taxes and garbage collection — are controlled by a government committed to imposing higher fees and charges as part of its deficit-fighting efforts.
"Irish small businesses have taken harsh steps to regain cost-competitiveness, but any gains are negated by the costs imposed by the government-administered sector," said Avine McNally, director of Ireland’s Small Firms Association.
Prices in August rose 0.7 percent from the previous month, the biggest such monthly gain since mid-2008.
Thursday’s inflation report noted that the biggest price jumps were recorded in clothing, because of the end of particularly aggressive summer sales, and in mortgages, because Irish-based banks are hiking their interest rates to cope with their own higher borrowing costs.
The biggest annual riser, education, rose 9.5 percent from the previous year.
Many retail goods also have kept falling in price over the past 12 months: clothing by 8.2 percent, household goods and services by 4.0 percent, and food and drinks by 3.2 percent.
Many Irish retail businesses have sharply pruned their prices since 2009 amid a slump in consumer spending, reflecting the impact of rising unemployment and falling net incomes.
The Insolvency Journal of Ireland says more than 1,400 businesses and firms went bankrupt last year and more than 1,000 already this year.
