Strong demand, which also spilled over geographically, only served to put further pressure on already stretched global supply chains. Goods inflation – which accounts for a quarter of the consumer spending basket – is currently far above historical averages, at 5% in Ireland and 5.5% in the euro area.
For Ireland, where goods deflation put downward pressure on overall (HICP) inflation for much of the last two decades, this is a huge swing.10 The third shock is Russia’s war of aggression against the Ukraine, which, quite apart from the devastating consequences for the people of Ukraine, has also exacerbated global inflationary pressures and supply-side constraints, notably in energy and food commodity inputs.