INFLATION SLOWED MARGINALLY to 4.6% in July according to figures released today by the CSO, while the Irish economy grew by 3.3% in the second quarter of 2023. 

The latest EU Harmonised Index of Consumer Prices (HICP) for Ireland is estimated to have increased by 4.6% in the 12 months to July 2023, a change from 4.8% in June. 

Food prices are estimated to have risen by 8.6% in the last 12 months while energy prices are estimated to have decreased by 1.3% over the same period.

‘Flash’ GDP figures also released by the CSO today show that the Irish economy grew by 3.3% from April to June of this year.

The ‘flash’ estimate is the initial estimate published one month after the end of the quarter with more detailed information due to be published in early September.

Strong economy

Minister for Finance Michael McGrath commented that the 3.3% growth more than reverses the 2.8 per cent fall recorded in the first three months of the year.

The quarterly increase was largely due to increased output in the multinational sector.

Minister McGrath said: “As I have stressed in the past, Modified Domestic Demand is a much better indicator of what is going on in the domestic economy and these data will be published just over a month from now.  My department will then begin the process of producing its autumn forecasts that will underpin Budget 2024.”

Modified domestic demand, a proxy for the domestic economy, is the sum of consumer spending, government spending and investment, excluding investment in imported IP and aircraft for leasing. It also excludes changes in the value of stocks.

“That said, high frequency data suggest that the domestic economy performed reasonably well in the second quarter – consumer confidence strengthened, unemployment reached a record-low of 3.8 per cent in June and construction activity picked up,” McGrath added. 

On the inflation data, McGrath said as the fall in wholesale energy prices is passed-on at the retail level, he expects headline inflation to ease further in the coming months.

However, he said he is also conscious that core inflation – price growth excluding energy and food – is still running at 5%.

“This largely reflects the strength of the economy right now and the achievement of full employment.  This is projected to ease, albeit at a somewhat slower pace than for headline inflation,” McGrath said.

The July inflation figure of 4.6 per cent is down from a peak of 9.6 per cent in July of last year.