Inflation unchanged at 4.3% in September

The cost of living held steady in September as the annual rate of inflation remained at 4.3 per cent, according to data released this morning by the Central Statistics Office (CSO).

Although the cost of living actually rose 0.3 per cent last month, this was the same increase recorded in September 2007, meaning there was no change to the annual rate.

This at the lowest level for the last 24 months, and inflation has dipped to 4.3 per cent four times over this period. In June, as oil prices rose sharply, it reached 5 per cent.

The CSO said prices for paid for housing, water, electricity, gas and other fuels were 12 per cent higher last month than in September 2007.

Over the same period education has risen 6.5 per cent, health by 6.3 per cent and food by 6.1 per cent.

Prices for clothing and shoes have fallen 5.5 per cent over the last year while furniture and household goods cost 1.7 per cent less now than in September 2007.

Last month clothing and footwear prices rose 4.3 per cent while transport costs declined by 0.6 per cent due to lower petrol and diesel prices and a fall in airfares.

Commenting on the latest figures, Alan McQuaid, economist at stockbrokers Bloxham, said that although there was no change in the headline annual inflation rate in September, it loosk like the worst is over on the prices front. He predicted that there is likely to be a significant drop in the headline inflation rate in 2009.

"All in all, we now think the average inflation rate this year will be 4.5 per cent or 4.6 per cent, down from 4.9 per cent in 2007. As regards 2009, we are currently forecasting an average rate of 2.7 per cent, with the possibility that we will see the headline rate running close to 2.0 per cent in the latter part of next year.

Assistant director of the Small Firms Association (SFA), Avine McNally, called on the Government to ensure that reducing the inflation rate was a "corner-stone in framing this year's budget."

The SFA has asked the Government to lower the standard rate of VAT by 2 per cent to 19%.

"Ireland currently has the highest 'reduced rate' of VAT, at 13.5 per cent, and the third highest 'standard rate' of VAT at 21 per cent, being surpassed only by Sweden and Denmark at 25 per cent and Finland at 22 per cent, in the European Union", Ms McNally said.

Isme, the Irish Small & Medium Enterprises Association, said the latest inflation figures were disappointing and warned that businesses are suffering excessively from production cost increases of up to 10 per cent per annum.

"The latest inflation figures are disappointing coming as they do after reductions in the previous two months. With the downward trend coming to a halt, a fresh impetus needs to be injected into the economy to ensure that costs are addressed and future inflation rates are reduced," said Isme chief executive Mark Fielding. 

Elsewhere, Fine Gael called on the Minister for Finance Brian Lenihan not to add to the inflation misery by introducing stealth taxes in the forthcoming Budget.

"Hard-pressed families got no relief in September from the relentless  rise in the cost of living with the inflation rate stuck firmly at 4.3 per cent.  Irish inflation has now been higher than 4 per cent for the last two years. In
the midst of the current recession it is vital that Brian Lenihan does  not add to this pressure by unleashing even more charges and stealth taxes in next week's Budget," said Fine Gael deputy leader & finance spokesman Richard Bruton.