Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

I thank the Deputy for raising the issue and also for providing me with a copy of the table she produced. I commend her on taking the time to put it together. It is an interesting piece of work.

I should note at the outset that this is primarily a consumer issue, and as such is primarily a matter for my colleague, the Minister for Jobs, Enterprise and Innovation. It would be a cause for concern if sterling's depreciation against the euro were ultimately not reflected in prices here.

I will consider this issue from a macroeconomic perspective. There are numerous sources of uncertainty at present which pose risks to the Irish economy. These risks are primarily external in nature and, as highlighted in budget 2017, include the potential impacts from the UK's recent vote to leave the European Union.

Over the course of 2016 and in particular since the Brexit vote, the euro-sterling rate has appreciated significantly. Since the UK's vote on 23 June the euro has appreciated by over 15% against sterling and is currently trading at a rate of around €1 to 89 pence sterling. In addition, further appreciation remains a distinct possibility with adverse implications for the Irish economy in general, most notably for Irish exports to the UK, especially in the more traditional sectors and also for areas sensitive to cross-Border trade.

While the appreciation of the euro-sterling rate is certainly one factor that can influence retail prices and consumer prices more generally, there are other significant and mostly external factors driving price developments. From an Irish perspective, the decline in the price of transport and energy products over the past two years arising from the fall in the wholesale price of oil has offset price increases in other areas, notably for services.

Annual inflation, as measured by the harmonised index of consumer prices, averaged minus 0.2% in the year to date and is expected to be slightly negative on average for 2016 as a whole. This recent easing in consumer prices has been broad based with food and non-alcoholic beverages, clothing and footwear, furniture and household equipment all recording significant annual price declines this year. This low and even negative rate of consumer price inflation has helped to protect real incomes and has supported consumer spending. This is the context in which we are discussing prices in high street retailers.

All else being equal, the appreciation of the euro against sterling should pass through into lower consumer prices, in particular for the range of goods that are priced in sterling. However, there are a number of factors which may delay this process. In general, consumer prices tend to respond to exchange-rate movements with a lag as firms delay price changes until there is greater certainty around future exchange rates. Also, many Irish firms importing from the UK will have purchased stocks prior to the UK referendum when sterling was at a significantly higher rate than that prevailing today.

It is also important to point out that the depreciation of sterling over the course of this year has increased the cost base for UK-based suppliers which could result in pressure on them to increase their sterling prices. However, the appreciation of the euro would be expected to offset partly, or wholly, such sterling denominated increases, depending on the extent of the appreciation.

This notwithstanding, there are some signs that consumer prices are benefitting from recent exchange-rate developments. For example, overall consumer prices have fallen by 0.2% year-on-year in the three months since the Brexit vote. Similarly, consumer prices of non-energy industrial goods, a large proportion of which we import from the UK, have fallen by an average of nearly 4% over the same period.

To the extent that I or my Department become aware of concerns regarding unwarranted price pressures arising from sterling's depreciation, they will be brought to the attention of the Minister for Jobs, Enterprise and Innovation and her Department which, as I have already noted, has primary responsibility for this consumer issue.

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