There has been a significant slowing in the estimated annual rate of inflation in October.
According to the latest “flash” estimate of inflation from the Central Statistics Office, the annual rate in October slowed to 3.6%.
The last time the annual rate of inflation was lower than this was back in August 2021, just before the latest cycle of price rises took off.
When compared to September’s figure of 5% inflation, the figure for October marks a significant slowing in the annual rate.
Much of it is down to energy prices which have fallen by 0.3% in the month and are down 4.2% compared to October last year.
Food inflation, which rose by 0.2% in October, continues to slow on an annual basis to 6.7%.
However, core inflation which strips out energy and food prices remains higher than the headline rate at 4.6%. This means catch-up inflation is still very present in many areas of the economy.
Today’s measure of inflation excludes mortgage interest payments so when the official figures for inflation come out next month, the annual rate will probably be higher.
An early estimate of growth in the economy, also published today by the CSO, has growth by GDP falling by 1.8% in the three months to the end of September.
This is due to falls in the multinational sector.
Compared to the same three months a year ago, GDP has fallen by 4.7%.
Irish GDP estimates can be sharply revised and last month’s final figure for second quarter growth was amended to 0.5% from an initial 3.3%.
The Government has long cautioned against using GDP to accurately measure economic growth as it is routinely impacted by multinational activity.
Its preferred measure, modified domestic demand, is not included in the flash estimates.
Commenting on today’s flash inflation figures, Minister for Finance Michael McGrath said that compared to this time last year, the inflation rate has fallen by almost 6 percentage points.
“The easing in inflation, driven by a fall in energy prices, is a welcome development for households and businesses throughout the country,” the Minister said.
“As the fall in wholesale energy prices is passed-on at the retail level, we can expect headline inflation to ease further in the months ahead,” he said.
But he also added that he was conscious that core inflation is still elevated at just over 4.5%.
He said this largely reflects ongoing capacity constraints with the economy operating at full employment.
“Looking ahead, core inflation is also projected to ease albeit at a somewhat slower pace than the headline inflation rate,” the Minister said.
Looking at today’s GDP figures, Michael McGrath also said that while the CSO does not provide a breakdown of the drivers of the decline, it is likely reflective of ongoing weakness in production in key multinational-dominated sectors.
“I would stress that the flash GDP data are initial estimates, and have been subject to meaningful revisions in each of the releases throughout the year, while GDP itself is not a particularly meaningful measure of domestic economic activity,” he said.
“More detailed information will be published in early-December, alongside my preferred measure for the domestic economy Modified Domestic Demand,” he added.