Belfast Telegraph

Friday 1 August 2014

High cost of living in Northern Ireland

Food and drink prices up by third in less than six years

Eating out, alcohol and tobacco, food, drink and transport costs have all risen hugely due to inflation
Eating out, alcohol and tobacco, food, drink and transport costs have all risen hugely due to inflation

Northern Ireland's consumers have had to deal with a 19% jump in the price of goods since the start of the global economic crisis while those in the Republic have seen prices rise by only 2%.

Those are the findings of analysis carried out by Ulster Bank economist Richard Ramsey which showed that while harsh austerity measures have dented consumer confidence south of the border over the last five years, a big leap in inflation here has acted as the main drain on disposable income.

What's more, wages haven't kept pace, climbing only 10% since the peak of the housing market bubble in August 2007 compared to 18.8% for the UK consumer price index.

In effect that means most people have taken a pay cut of 8.8%.

Some categories of consumer goods have experienced bigger price rises than others.

Housing and household services, which includes utility bills, climbed 30% between August 2007 and January 2013, transport climbed 23%, alcohol and tobacco climbed 38%, food and drink climbed 34% and rate of prices increase for restaurants and hotels stood at 19%. Most of these prices rises can be explained by a rally in world markets for crude oil and commodities over the last few years, but despite those being a global issue, the UK has been impacted most.

For our nearest economic neighbour the Republic, the picture is very different.

There housing and household services climbed only 6%, transport by 7%, alcohol and tobacco by 12%, food and drink by only 1% and the price of restaurants and hotels actually fell by 1% over that time.

Our high inflation rate hasn't just been a burden to us, it's also exercised the pen of Bank of England governor Mervyn King (right).

If the monthly money CPI inflation report is more than 1% away from the bank's target of 2%, the governor is forced to write a letter to the chancellor to explain why it has happened. Since the start of the credit crunch, he's been kept busy.

"During this time, the Governor of the Bank of England (BoE) has written 13 'Dear chancellor letters' (a 14th letter was written in April 2007 before the credit crunch), to three different chancellors," Mr Ramsey said.

And it doesn't look as if inflation is going to ease any time soon.

In last week's inflation report the Bank of England said it expects CPI to peak around 3.2% in mid 2013 and stay above 2% until 2016.

In that case one of the first tasks of incoming governor Mark Carney may be to write a letter to George Osborne.

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