Inflation falls in 2023 due to reduction in energy and food costs

CPI fell from 8.5% in February to 3.9% in November 2023

To alleviate the increasing energy prices three extra electricity support credits of €150 each will be issued from 29 November 2023 to 28 February 2024 (Photo by Pavel Danilyuk via Pexels)

The Consumer Price Index (CPI), Ireland’s official measure of inflation, dropped over the course of 2023 from a high of 8.5% in February 2023 to 3.9% in November 2023. This is down on the high inflation levels seen in 2022 and early 2023 where inflation was above 7% for 12 months from April 2022 to April 2023 and peaked at 9.2% in October 2022. Inflation during this period was driven by an increase in energy costs with the price of electricity, gas and other fuels peaking at 72.8% in October 2022.

In 2023, energy prices began to fall and the impact of mortgage interest rate hikes became one of the main contributors to the CPI. The increase in mortgage interest rates peaked in August 2023, up 51.3% on the same month in 2022. Additional key contributors to inflation in 2023 were the price of food, the cost of eating out in a restaurant, and staying in a hotel.

Looking at the national average prices of staple items as of November 2023, the price of a 2.5kg bag of potatoes was up by 30c and a kilogram of cheese was up by 21c when compared with November 2022. The price of milk and butter fell slightly and were down 6c and 3c respectively.

The wholesale price index release includes producer price indices for food products, construction materials, and wholesale electricity prices. Producer prices for food products increased from December 2022 to January 2023 but have declined since. As of November 2023, the index hit its lowest point in two years, with the last lower point recorded in December 2021.

In November 2022, the producer price index for dairy products reached its highest point of 188.5 since January 2015. By November 2023 the index was back down to 122.5, which was the lowest point since September 2021.

Wholesale electricity up to November 2023, shows that the wholesale electricity price index for each month in 2023 was lower than the corresponding month in 2022.

Total exports of goods for January to October 2023 were valued at €167 billion, almost €10 billion (5%) less than exports in the first 10 months of 2022. Goods exports for this period of 2023 were still almost €30 billion, or 22%, higher than January to October 2021 value of €137 billion.

Total goods imports for the first 10 months of 2023 were almost €113 billion, more than €3 billion lower than the same period of 2022. 

Goods imports for this period in 2023 were nearly €31 billion more than imports in January to October 2021.

Government support for increased energy prices in 2022 and 2023 included reducing VAT on household electricity and gas from 13.5% to 9% starting May 1, 2022, until October 31, 2024. A credit of €200 (including VAT) was issued to all domestic electricity accounts between April 1, 2022, and June 30, 2022. Another €200 credit for 2022 was provided from November 1, 2022, to December 31, 2022, followed by two more credits between January 1, 2023, and April 30, 2023. Additionally, three electricity support credits of €150 each will be given between November 29, 2023, and February 28, 2024.

In 2022, including the initial two €200 credits, the median annual electricity bill dropped to €909, marking a 28% decrease from €1,268 in 2021. This reduction was influenced by a 12% decline in electricity usage throughout 2021. 

The final impact of winter 2022-’23 on bill costs will be seen when the 2023 data is released later in 2024.

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