This morning Ireland’s Central Statistics Office (CSO) has released its inflation figures for May 2012. The monthly headline Consumer Price Index (CPI) was flat compared to April and March 2012, and up 1.8% year-on-year (slightly down from 2%+ annualized rates that have pertained since January 2011). Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 4.8% in the past year as ECB rate cuts and greater scrutiny of variable mortgage interest rates take effect. Just a few months ago, mortgage interest was rising by 20% per annum, and as mortgage interest costs account for nearly 6% of the basket which measures inflation, the impact on inflation was substantial.
Energy costs in homes, which account for 5% of the total basket examined by the CSO, have risen by 11% in the past 12 months, the same annual increase as pertained in March. This should be a cause for concern.
Elsewhere private rents fell by 0.1% in the month of May 2012 – the second monthly decline in 2012 and the first time since before 2010 that there have been two consecutive monthly declines – and over the past year, such rents are up by 2.2% according to the CSO – there is some small rounding in the figures above which show 2.0%. It seems that in our financial crisis, the big correction in rent took place in 2009 with a 19% maximum decline, compared to a decline of just 1.4% for all of 2010. Since the start of 2011 there has been a 3.6% increase (mostly recorded in February and October 2011 and February 2012). At the start of January 2012, the Department of Social Protection reduced its rent assistance payments by up to 29% (an average of 13%) and the Department says that some 40% of the rented market in the State is affected by rent assistance payments, which at the end of 2011, was paid to 98,603 households. The Department’s 40% is derived from information provided to it by the Private Residential Tenancies Board. The Department is projecting it will save €55m in 2012 from its €500m budget for rent assistance, the saving comprising €33m to changes to the minimum contribution and €22m in relation to the new maximum limits. The decline in March and April 2012, when three month notices given in January 2012 would have expired may herald the start of the long awaited impact of the reductions in rent assistance announced in January 2012. Though on the other hand, the modest 0.1% decline in May 2012 might suggest the adjustment is coming to an end.
Private rents have tended to fall in line with rent allowance even though many landlords will not accept rent allowance tenants. The betting on here is that private rents will come under pressure in the short term, though you shouldn’t read too much into the results for two months. Property commentators including those in NAMA have pointed to a buoyant rental market as one of the bright spots in an otherwise dismal property market, but that buoyancy may deflate in coming months as the artificial supports of State-aided rent assistance dissipates.
NAMA Wine Lake 
off topic.
the latest adjusted unemployment figure is 14.8%.
this puts in in-between the base and adverse scenarios in the FMP report of 12.7 & 15.8 respectively for 2012 but strongly trending/leaning to adverse.
@JR, yes the latest CSO Quarterly National Household Survey is pretty dire with record unemployment in the State of 14.8% for Q1, 2012 though it says we are at 14.7% for May 2012. Male unemployment is put at 17.7%. It is very difficult to reconcile this report with claims from the Government in recent weeks, and it really looks as if the spectacular job announcements are in fact creating jobs that might be spread over years whereas most job losses are not making national headlines.
Click to access qnhs_q12012.pdf
@ jr The QNHS figures look a little strange to me. They show for example increases in employment numbers in retail/distribution and a very marginal increase in information and communication. I would have expected a substantial drop in retail and a bigger increase in ICT. The decline of over 3.5% in Industry in one quarter also looks odd.
The increase in the rate of unemployment is reflected in the Govt. spending profile.http://www.finance.gov.ie/documents/exchequerstatements/2012/analspendMay2012.pdf, DSP is over profile.
The Income Tax figures for the first five months are very strong and are running well ahead of profile, which of itself was a challenging target. This suggests that there is strong employment growth somewhere in the economy.
@Niall, “This suggests that there is strong employment growth somewhere in the economy.” or strong (individual) earnings.
It’s hard to reconcile the income tax take with the numbers in employment. (fwiw I tend to look at full-time employed)
@ NWL & AM. There are I agree a number of reasons why the Income Tax figures are up. Earnings in certain industries are stronger, which has played its part but if you look at the April & May figures alone, which reflect tax returns after approx. 9,000 Public Servants left, the figures remain strong. It would take a lot of pay rises to make up for the tax forgone on those salaries.
I agree that there is a net loss of employees, however the tax yield from say a 1,000 new ICT workers is far greater than perhaps the tax forgone on 2,000 retail workers. Also many of those being hired may not be Irish, reflecting the lack of movement in the unemployment rate.
For example if you take April, the yield last year was €1,264M. I am going to increase this by €25M for comparative purposes because of the USC/PRSI error, giving an amended figure of €1,289M. The yield in April 2012 was €1,375M an increase of 6.67% Remember this is after the Public Service departure, which would have reduced the tax yield by around €20-25M per month.
I would also point out, if IBEC & ISME are to be believed that there are pay cuts in some industries.
Good point. I would guess there’s significant European competition for the NMC jobs. Unfortunately Irish graduates have been let down by the states indifference to language skills. ‘Ah ra sure English is all you need’ isn’t cutting it.
@ John I don’t think it is just language issues. Rather it is a lack of graduates across a variety of disciplines, particularly at post grad level.
The adjustment for the Public Service departures should read €10-15M per month.
There are many adjustments to be made in order for Ireland to compete in the new world order. For example, Public Service pay will have to come down by up to 20%. Our civil servants are grossly overpaid compared to the private sector and to that paid to civil servants in the rest of Europe (I would even say the world – but I do not have statistics to hand). Also in relation to language skills – the American schools are teaching Mandarin Chinese from primary school. We teach Irish! Time to get real.
@wstt
As education is to the fore in this thread…..I said it before but I have seen Californian 8 year olds develop, and produce, all the documents needed to run an ‘imaginery’ soup kitchen in their town. Menus ads etc. It was in three languages( english,chinese,spanish) and looked great. They did it in groups. No special project just another lesson. They used computers, printers,etc. themselves.
Maybe this activity doesn’t show up on OECD reports as much, nor does it compare with learning Peig by heart.
But the kids learned a lot, and it is easy to embed math or anything in a project like this. But one tiny example, thinking outside the crucifix. Not saying Irish kids cannot do equal, but I bet they don’t get the chance as much There is test to worry about after all.
Hi Niall,
Looking at y-on-y changes in table 3a of the cso pdf, there isn’t much to suggest an aggregate increase in income tax collected.
table 4a is curious. It shows a y-on-y 6k increase in the numbers described as “Managers, directors and senior officials”. Though why this segment would grow as others shrink is counterintuitive (too many chiefs and not enough indians). Normally when a company is, eh, resizing; the more expensive middle and snr managers get hit hard. Hopefully the growth in this category isn’t PS. My suspicion is business start-ups (where the fella flipping the burger is the manager).
I think the income tax base should be a little lower this year, so the rise in income tax collected this year is explained by other factors. Perhaps ‘reclassifications’ or once-off windfalls. Maybe things like the granny tax issue are helping amounts collected.
@ AM There are clearly some factors outside of an increase in employment and or earnings. The additional yield on the SW pensions was factored into the Government’s profile and is worth perhaps an addition €10M per month. I have also factored in the incorrect allocation of USC in 2011. Later in the year (December’s tax figures) there will be a one off gain from Facebook staff RSU’s which vest in November six months after the Initial Public Offering.
I have no doubt that we continue to lose jobs but my point is that the Income Tax yield reflects substantial gains in income/employment in other places. No more than that.
On the issue of the quality of the QNHS, I have been sceptical of the reports for some time. For example its annual review of the number of members of pension schemes does not tie in with the Pension Board’s figures. They certainly get the trends correct, but specifics I don’t think so.
Collection of data is being compromised by cut backs.
Most of the jobs being advertised require a minimum of Level 8 qualifications. I think this may explain the classification issue.
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