THE COST of living rose by 0.3 per cent in September, but the annual rate of inflation remained steady at 4.3 per cent. Economists, however, now believe that the worst is over in terms of price increases.

According to data released by the Central Statistics Office (CSO), in the year to September 2008 the consumer price index remained unchanged at 4.3 per cent, although prices fell by 5.5 per cent for clothing and footwear, while furniture and household goods cost 1.7 per cent less than in September 2007.

There were notable increases, however, in housing, water, electricity, gas and other fuels, as higher-than-average mortgage interest repayments and increases in the cost of natural gas and house maintenance services charges resulted in prices rising by 12 per cent in the year from September 2007.

Price increases were also recorded in education, health, food and non-alcoholic beverages.

In September, the only decrease was recorded in transport, as prices fell by 0.6 per cent due to lower petrol and diesel prices.

There were significant monthly price increases in clothing and footwear (+4.3 per cent), due to a recovery following the traditional summer sales, and increases in private telephone charges leading to price rises in communications (+1.2 per cent).

Commenting on the latest figures, Alan McQuaid, economist at Bloxham Stockbrokers, said that although there was no change in the headline annual inflation rate in September, he believed that it looked like the worst was over on the prices front.

He predicted there was likely to be a significant drop in the headline inflation rate in 2009 as global commodity prices looked set to fall sharply over the next 12 months.

"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," he said.

However, Mark Fielding, chief executive of Isme, the Irish Small Medium Enterprises' Association, said that the latest inflation figures were disappointing and he called for a "fresh impetus" to be injected into the economy to ensure that costs were addressed and future inflation rates were reduced.

Assistant director of the Small Firms' Association Avine McNally shared Mr Fielding's viewpoint when she called on the Government to ensure that reducing the inflation rate was a "cornerstone in framing this year's budget".

The SFA wants no indirect tax increases, by way of VAT or excise duties, in next week's budget and would like the Government to examine the potential for actual decreases in indirect taxation.