The cost of living is one of the most contentious issues in the political arena at present with the spat marked by much hyperbole.
The cost of living is measured by the consumer price index (CPI), which is the rate of change in the prices of goods and services typically consumed by private households in the economy.
It is compiled and published monthly by the Central Statistics Office (CSO). This index is a weighted average of price movements of about 600 representative items, and the weights attached to each item are normally revised every five years.
Subsidiary index numbers are available for 12 main groups such as food, clothing and footwear, health, education, transport, housing, water, electricity, gas and fuels, and restaurants and hotels.
In Ireland, the share of the major groups in the index has changed over time. For instance, the proportion of expenditure on food in the index has fallen from 27 per cent in 1975 to about 9 per cent in recent years.
Expenditure on alcohol and tobacco has fallen from 16 per cent to less than 6 per cent and clothing and footwear from 11 to 5 per cent over the same period.
The categories of household expenditure which have grown proportionally, as incomes have grown over time, are mainly recreation and culture, restaurants and hotels, and communications.
The rate of inflation, worldwide or regionally, has fluctuated sharply over recent decades often associated with global phenomena such as recurring oil crises, political disturbances such as Russia’s invasion of Ukraine, climatic events causing food shortages and Covid-19.
After a decade or more of very low and steady inflation, the Covid-19 pandemic and Russia’s invasion of Ukraine successively caused a sharp and upward movement in consumer prices.
By October 2025 the CPI was some 27 per cent higher than in 2020 with food coming in at about the same rate.
However, the most dramatic increase occurred in energy costs having increased by more than 60 per cent over the past five years and concentrated in 2021-2022.
Food
It is well to stress food inflation has exceeded the overall average rate, quite frequently. In general, the cost of some imported food and drink items such as vegetable oils, sugar, coffee and tea has often risen more than the average Irish produced quantum.
Bearing in mind that about half of our food consumption is domestically produced, there is an approximate correspondence over time between our farm input costs, product prices and consequently food prices for that segment.
With respect to farm inputs, the price of fertiliser more than doubled after Russia’s invasion of Ukraine, then subsequently fell way back but is still well above its 2020 level.
As this input is one of the most critical in agricultural production, representing up to 20 per cent of total farm costs, it will not revert to pre-invasion levels in the short term, and thus will impart upward pressure on farm costs and food prices.
The price level for the biggest farm input, concentrate feed, remains relatively high but the expectations are for little change in the medium term.
Turning to farm output prices, which are typically more volatile than consumer prices, but are a useful guide to what will subsequently transmit to the latter, they began to increase early in this decade and to get extremely volatile and generally upward, particularly for beef and milk products.
Whereas average farm product prices are about 60 per cent higher than in 2020, beef prices are at a record high being over double their 2020 level with the price of milk about 50 per cent greater.
These trends reflect firmer world demand, particularly in the US and Chinese markets for beef, and reduced supplies, and this rapid rise in farm prices is far and away the highest in the EU.
The exceptional farm prices are translating into higher food prices with the food price index for October showing a year-on-year increase of 4.5 per cent with beef and dairy product prices increasing by 23.5 per cent and 10 per cent respectively.
Over the past five years the prices of many imported food products such as non-alcoholic beverages, sugar, oils and cocoa have put significant upward pressure on food inflation.
Incidentally, as noted by the Competition and Consumer Protection Commission, Ireland’s rate of food inflation has been below the EU average for 15 of the past 16 years even though the actual level is above the EU average.
Consensus
There is now a consensus emerging that the present fragility and insecurity in world markets could persist for as long as the conflict in Ukraine lasts, but there is also a strongly held view that an end to the conflict could quickly normalise world trade, reduce farm input and commodity price levels and moderate food prices appreciably.
Given our experience of events such as Covid-19 and Russia’s invasion of Ukraine, which were never anticipated, and the increasingly catastrophic and random effects of climate change, undertaking any exercise anticipating the future might be considered foolhardy and fraught with uncertainty.
In Ireland food prices may be about to moderate in the next few months, but we are unlikely to return for the foreseeable future to the food price level prevailing pre the invasion of Ukraine.
In reality, the world economy has become more vulnerable to shocks from extreme weather events, geopolitical tensions, climate change, and policy alterations in major commodity markets and we are unfortunately at their mercy.
Of all the components in the CPI, food prices may become one of the more volatile in the future due to weather-induced events related to climate change.
Brendan Kearney is an economic consultant
