ESRI Warns of «Second-Round Effects» on Prices, Revises Inflation and Housing Forecasts

The Economic and Social Research Institute (ESRI) warns of «second-round effects» on prices later this year due to higher energy costs. Its latest Quarterly Economic Commentary indicates a typical nine-month lag between fuel and food price increases, suggesting higher grocery bills this autumn and winter. The ESRI revised its inflation forecasts upwards to 3.7% for 2026 and 3.1% for 2027.

The institute also upgraded its forecast for economic growth, measured by Modified Domestic Demand, to 2.6% for 2026. This revision is linked to stronger investment from increased housing output and rising technology investment in AI and data centers. Professor Conor O'Toole, a report author, noted strong international headwinds, elevated fossil fuel prices, and Middle East conflict uncertainty, predicting higher consumer prices in Ireland this year and next.

The ESRI criticized the recent fuel support package as «poorly targeted» and its structure as «disappointing,» attributing this to readily available revenue and political pressure. It advised that upcoming public sector pay talks consider public finances vulnerabilities. The ESRI revised annual housing completion forecasts up to 38,500 for 2026 and 40,500 for 2027 but warned that a lack of sustained upward momentum in planning permissions challenges meeting medium-term targets, leading to a growing housing deficit.

The labor market outlook remains positive, with low unemployment expected. However, the report highlights potential negative impacts of artificial intelligence on the Irish labor market, urging close attention to this area.