Ireland

Ireland’s levels of Inflation

Marta Pacilli and Abdulaziz Saleh F Saad

GBSB Global Business School Madrid

Irish Consumer Price Inflation and Deflation

Inflation indicates a generalized and continuous growth of prices over time. It is a fundamental
indicator because the price level affects the purchasing power of families, the general trend of the
economy and the orientation of the monetary policies of central banks. Inflation as measured by the
consumer price index reflects the annual percentage change in the cost to the average consumer of
acquiring a basket of goods and services that may be fixed or changed at specified intervals, such as
yearly.
This page highlights the historical overview of inflation in Ireland, from -0.922% in 2010 to -
0.335% in 2020.

The term deflation, on the other hand, indicates a decline in the general price level. Deflation is
therefore the opposite of inflation. Deflation itself is generally a negative phenomenon, but there are
types of "positive" deflation and favorable aspects of deflation.
A decline in the general price level very often results from a negative growth situation in which the
demand for goods and services is contracting. This prompts the companies themselves to try to sell
their products at lower prices, in the hopes of stimulating consumer demand and response.
As a result, companies sell their products at a lower price and therefore experience a decrease in
turnover. To balance this contraction in turnover, companies try to reduce the costs for raw
1
materials and services deriving from other companies, to cut the cost of labor, to squeeze financing
from banks. These interventions, in turn, tend to compress the aggregate demand for goods and
services, aggravating the situation and bringing new deflationary pressures.
The rise in unemployment resulting from the cut in labor costs, for example, will force the new
unemployed to reduce their expenses, negatively affecting demand. However, deflation also tends
to correspond to an increase in savings which can lay the foundations for a healthy economic
recovery.
According to the Central Statistics Office of Dublin, the consumer price index in Ireland marked a
deflation of 0.4% per year in February 2021, worsening compared to the decline of 0.2% in January
2021 (1.0 in December 2020), in the 11th consecutive month of contraction. On a sequential basis,
the consumer price index rose by 0.4% against the previous 0.1% (0.3% in November and
December). The harmonized price index recorded a deflation of 0.4% per year (0.3% monthly
growth).

Irish Core Inflation

Core inflation is the term used to indicate the measure of the average price increase by excluding
from the count the goods that are typically subject to strong price volatility, especially those related
to energy and food.
Core Inflation Rate in Ireland averaged 2.52 percent from 1983 until 2021, reaching an all-time
high of 10.20 percent in January of 1984 and a record low of -6.10 percent in October of 2009.

References

Inflation, consumer prices (annual %) – Ireland, The World Bank Data,

https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?end=2020&locations=IE&start=2010

(07 February 2020), Cos’è l’inflazione? Significato, cause e calcolo dei tassi di inflazione, Borsa
Italiana, https://www.borsaitaliana.it/notizie/sotto-la-lente/inflazione.htm

(12 March 2021), Irlanda: in febbraio prezzi consumo in deflazione dello 0,4%, Trend Online,
https://www.trend-online.com/borsa/irlandain-febbraio-prezzi-consumo-in-deflazione-dello-0-4--
408188/

2
Ireland Core Inflation rate, Trading Economics, https://tradingeconomics.com/ireland/core-
inflation-rate