Ireland's harmonised inflation rate now lower than Eurozone

[freedomlover]

Ireland's harmonised inflation rate (HICP) has falled to 3.1% in January. In the Eurozone as a whole it was 3.2% in January. I think this is the first time since Ireland joined the Eurozone that our harmonised inflation rate has been lower than that for the Eurozone as a whole. Considering that Ireland's economy grew by 6% in the past year, while the Eurozone economy grew by only 2.5%, this is a good achievement.

http://www.cso.ie/releasespublications/ ... nt/cpi.pdf

Mortgage interest rates are not included in the harmonised measure. If these are included, Ireland's inflation rate fell to 4.3% in January from 4.7% in December and 5.0% in November. One of the things keeping it from falling further is that rents increased by 12.3% in the year to January. When I drew attention to rising rents in the past, a number of posters claimed that the CSO got it wrong and that rents are actually falling. I'm sceptical of this myself but have no way of knowing for sure. However, if perchance such posters are correct and the CSO rent figures are wrong, then the overall inflation rate would be about 1% lower than the CSO say. Oil prices are now falling quite sharply and its increasingly likely that the ECB will reduce interest rates in the summer. If both these happen, then the overall infaltion rate could be exceptionally low towards the end of this year.

[Aindriu]

When I drew attention to rising rents in the past, a number of posters claimed that the CSO got it wrong and that rents are actually falling.

Rents did start to fall but are increasing again. It is a bloody disgrace that they are too.

[White Horse]

If you believe these statistics.

[rockofcashel]

Isn't it great now that we have two measures for inflation.. Cowen can just pick the lower one, and make it look better for the economy.

It is pointless considering the HICP for exactly the reason you pointed out in your opening post FL. The cost of servicing housing, via mortgage or rent, is close to between 30-35% of a persons disposable income, and to ignore movements in this cost is just ridiculous. But hey, its all about looking good isn't it.

I say potato, You say tomato..... and claim that you are right, because its "almost" the same thing

Fact is, the rate of inflation is almost 50% higher than the figure you are using..

sounds huge doesn't it, when said like that.. 50%

But as they say, there are lies, damn lie.. and statistics

[HanleyS]

If the HICP is falling that sharply how long before it's negative?

[rockyracoon]

A falling inflation indicator can also be a sign of a slow down in ecnomic growth. An inflation indicator that doesn't take into account housing costs is just plain ludicrous, and I would contend that for very many people in Ireland housing costs are above 35% of disposable income.

[returning officer]

A falling inflation indicator can also be a sign of a slow down in ecnomic growth. An inflation indicator that doesn't take into account housing costs is just plain ludicrous, and I would contend that for very many people in Ireland housing costs are above 35% of disposable income.

Well tell that to the Eurocrats...the point of a harmonised instrument of measurement is that the same methodology is used by those to faciliate comparison by all. Invariably whingers always pick the highest rates to tell their tales of woe, rather than Biffo, since few who can tell the difference between them, care which one he choses to publishize. Good grief.

[adrem]

Isn't it great now that we have two measures for inflation.. Cowen can just pick the lower one, and make it look better for the economy.

It is pointless considering the HICP for exactly the reason you pointed out in your opening post FL. The cost of servicing housing, via mortgage or rent, is close to between 30-35% of a persons disposable income, and to ignore movements in this cost is just ridiculous. But hey, its all about looking good isn't it.

I say potato, You say tomato..... and claim that you are right, because its "almost" the same thing

Fact is, the rate of inflation is almost 50% higher than the figure you are using..

sounds huge doesn't it, when said like that.. 50%

But as they say, there are lies, damn lie.. and statistics

That's a little bit OTT RoC. The use of the HICP is simply to allow a standardised model of inflation tracking across the EU. The Govt., opposition, social partners all use CPI in any commentary about cost of living, wage negotiations etc etc - the HICP is only ever used in comparing inflation across Europe.

Bottom line - inflation (by whatever measure) will be coming down over the coming months, and that's not a bad thing.

[freedomlover]

Isn't it great now that we have two measures for inflation.. Cowen can just pick the lower one, and make it look better for the economy.

It is pointless considering the HICP for exactly the reason you pointed out in your opening post FL. The cost of servicing housing, via mortgage or rent, is close to between 30-35% of a persons disposable income, and to ignore movements in this cost is just ridiculous. But hey, its all about looking good isn't it.

I say potato, You say tomato..... and claim that you are right, because its "almost" the same thing

Fact is, the rate of inflation is almost 50% higher than the figure you are using..

sounds huge doesn't it, when said like that.. 50%

But as they say, there are lies, damn lie.. and statistics

Over the long run it doesn't matter which measure is used, they'll both give virtually the same result. The HICP measure is lower when interest rates are rising and higher when interest rates are falling. Currently the HICP measure is 1.2% lower than the measure which includes mortgage repayments (3.1% versus 4.3%) because interest rates have risen in the past year. If there are a couple of cuts in interest rates this year, then by the end of 2008 the measure which includes mortgage repayments will be around 1.2% lower than the HICP measure. In fact, it could quite easily fall to under 1% if such cuts in interest rates materialise. For comparisons between countries the HICP measure is the one invariably used because its calculated the same way for all countries. That's why its called 'harmonised'.