Price hikes for fuel, housing and food to hit 40-year high

Rising fuel, food and housing costs are expected to hit a 40-year in Ireland this year, putting unprecedented strain on household budgets.

Prices rises are expected to peak at around 8.5pc this summer, according to the Economic and Social Research Institute (ESRI), reaching a level not seen since 1984.

Wages and government supports are unlikely to keep pace with average inflation of 6.7pc for the year.

This would mean disposable income could fall by around 2pc, the ESRI said in its quarterly economic commentary.

“[Inflation] is likely to peak in mid-summer before falling back somewhat towards the end of the year,” ESRI research professor Kieran McQuinn said.

Energy and food costs are already rising as a result of the pandemic, with consumer price inflation hitting 5.6pc in February.

The war will put further strain on oil and gas, cereal, cooking oil, fertiliser and metals exports from Russia and Ukraine. This will lead to hikes in the cost of home heating, transport, electronic goods, building materials and basic foods such as bread and pasta.

Housing completions could suffer due to more expensive materials and supply delays. A 1pc increase in building costs lowers new supply by around 1.4pc, the ESRI estimates.

“We would stress there is a lot of uncertainty around these figures. It may well be the case you could see inflationary pressures being more acute than that,” Mr McQuinn said.

Price rises will slow down later in 2022 but inflation is set to remain high in 2023, at 5pc.

The forecast marks a major upward revision on previous ESRI predictions, which tipped inflation to peak at around 6pc this month.