Air fares down 29pc but inflation on the rise

PRICES SLIPPED in September as the cost of air travel and health insurance decreased compared to the previous month, according to the latest Consumer Price Index from the Central Statistics Office (CSO).

However, the annual inflation rate rose to 0.5 per cent in the year to September, the largest increase since December 2008, and up on the 0.2 per cent rise recorded a month earlier. On a monthly basis, prices were down slightly, dropping 0.1 per cent.

Responding to the figures, Fine Gael spokesman on enterprise Richard Bruton said there was no sign consumer confidence had returned, while it was sectors where prices are regulated by the Government that continued to see upward pressure on prices.

“It is remarkable that, despite the far deeper deflation in Ireland than elsewhere in the euro area, Irish telecommunications, insurance and education charges are all rising faster than in Europe,” Mr Bruton said.

Trade union Unite said the 0.5 per cent rate of inflation would be “dismissed by Government cheerleaders as negligible” but that they contained “worrying trends” that would hurt the weakest members of society the hardest.

The Small Firms Association (SFA) and the Irish Small and Medium Enterprises Association (ISME) criticised the Government for not tackling costs in the business sector and said further jobs would be lost if they are not brought under control.

The price drop was driven by a decline in transport costs, which fell 1.6 per cent as air fares plummeted 29 per cent, while health insurance premiums fell 1.2 per cent due to special offers. This was offset by a 4.5 per cent monthly rise in clothing and footwear prices as the summer sales ended.

On an annual basis, the cost of air transport is up 16 per cent while health insurance premiums are 9 per cent higher. Conversely, the cost of clothing and footwear is down 7.4 per cent.

Ireland remained in deflationary territory on the basis of the EU Harmonised Index of Consumer Prices (HICP), which excludes items such as mortgage interest. By this measure, Irish prices fell 0.2 per cent compared to August and are down 1 per cent year-on-year.

Ireland is one of only two EU countries to be in deflationary territory, the other being Latvia.

“The last thing we need is to get stuck in a deflationary spiral like Japan,” said Bloxham economist Alan McQuaid. “Hopefully, this won’t be an issue, but the likelihood of further severe fiscal austerity measures in the forthcoming budget will only add to deflationary pressures.”