Trade with UK Pushes Ireland Back to Deflation

Published in

What was that about the end of “deflationary forces” in the eurozone? While the rest of the eurozone shows tentative signs of a self-sustaining increase in prices, Ireland’s economy returned to deflation in June, and economists at the local central bank are blaming the country’s reliance on trade with the UK, the Financial Times reported. While a weak pound has led to uncomfortably high inflation in the UK, its post-Brexit referendum depreciation has created the opposite problem in Ireland. Data released this morning showed that, on an EU-harmonised basis, average consumer prices in Ireland in June were 0.6 per cent lower than the same month last year, the lowest figure since last March. In an “economic letter” released this afternoon, economists at the CBI estimated the pound’s weakness – it has fallen 13 per cent against the euro since the referendum – caused prices to be 1.2 percentage points lower over the course of a year than they would have been if sterling had remained stable. Despite a shift in recent years, the UK is still one of Ireland’s most important trading partners, providing almost a quarter of the country’s total imports in 2016. Read more. (Subscription required.)