Consumer prices down 0.4%

Consumer prices fell by 0.4 per cent last month and were down by 6.5 per cent in the year to the end of September, according to new CSO figures.

The Consumer Price Index (CPI) shows that consumers prices declined last month after having risen for the first time in a year in August. The annual fall to the end of August was 5.9 per cent.

During September, the cost of clothing and footwear rose by 3.6 per cent, however this was offset by a 1.3 per cent decline in the price of food and non-alcoholics beverages and a 0.9 per cent decline in transport.

The CPI excluding tobacco index for September decreased by 0.4 per cent tin the month and was down 7.1 per cent in the year.

During the year to the end of September, costs for good fell by an average of 6.5 per cent with the biggest decrease found in housing and utilities which recorded a 28.5 per cent decline in prices. Over the 12-month period there was also a 13.8 per cent fall in clothing and footwear, a 6 per cent drop in food and non-alcoholic beverages and a 4 per cent decline in transport.

Services prices fell by 7.5 per cent in the year to September, while goods fell by 5.3 per cent.

In the year the costs of miscellaneous goods and services rose by 7.6 per cent. There was also a 7.5 per cent rise in the price of alcohol and tobacco, and a 3.9 per cent and 2.5 per cent increase in education and health costs respectively.

The Harmonised Index of Consumer Prices (HICP), the EU-wide measure of inflation that excludes mortgage interest from its calculations, decreased by 0.4 per cent in September, compared to an increase of 0.3 per cent for the same month a year earlier. As a result, prices on average, as measured by the HICP, were 3 per cent lower in the year to the end of September.

Commenting on the figures, Alan McQuaid, chief economist at Bloxham stockbrokers said it was quite clear the Irish economy remains deep in deflationary territory and that there are a number of factors such as energy costs, mortgage rates and retail discounting which could influence the CPI either positively or negatively in the coming months.

"Retail discounting will be a key feature of the CPI over the remainder of 2009 and early 2010. The combination of ample spare capacity and the fairly weak outlook for household spending suggest that retailers could be forced to cut their margins further in order to entice consumers back into the shops,2 he said.

"And with sterling remaining extremely weak, the danger is that many more shoppers in the Republic will travel up to Northern Ireland to do their spending as the Christmas season approaches unless retailers here offer sizeable discounts. But as things currently stand, it now looks like the headline CPI will be 4.5 per cent lower on average this year than in 2008," he added.

General secretary of the Irish Congress of Trade Unions (Ictu) David Begg today called on the Government to revise plans to cut public spending by €4 billion in the next budget, seeking instead a more gradual adjustment, and to avoid inflicting "excessive hardship" on people.

"You're imparting a huge deflationary shock on to an already deflated situation," he said on RTÉ Radio this afternoon. 

"My fear of something like this is that it will send the economy into a very deep tailspin from which we might take years to extract ourselves. We're at a very dangerous point; I think we need to be very careful what we do."

Mr Begg said the cuts could be introduced over a peiod extending to 2017.

"We need some stimulus to the economy more than anything else at this point in time," he said.

"We need to try to manage this adjustment over a longer period of time. We're not suggesting you leave it untouched, simply that you try to do it in a way that avoids that type of very serious shock being imparted to the economy."