Consumer prices fall by 0.4% as pandemic dampens activity

Consumer prices were on average 0.4 per cent lower in February compared to a year ago as the cost of clothing and footwear, transport and household furnishings all fell.

Reduced consumer activity as a result of Covid-19 has ushered in a period of modest deflation.

However, economists have questioned the validity of the latest numbers with so much of the retail sector effectively closed.

The latest consumer price index (CPI) from the Central Statistics Office (CSO) suggests the most notable changes in the year were decreases in clothing and footwear (-6.8 per cent), transport (-2.7 per cent), and food and non-alcoholic beverages (-1.9 per cent).

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Within the transport category, the cost of petrol and diesel were 7.3 per cent and 7.8 per cent down respectively.

The latest figures also show the cost of motor insurance was down 5.8 per cent in year-on-year terms.

There were, however, increases in the cost of restaurants and hotels (+3.2 per cent ), health (+2.6 per cent) and alcoholic beverages and tobacco (+1 per cent).

Euro area

Inflation in the euro area remained steady last month as coronavirus lockdowns weighed on the region's economy. Prices increased an annual 0.9 per cent in February, matching expectations. They jumped sharply in January on the back of a range of technical factors such as the expiration of a temporary sales-tax cut in Germany. A measure excluding volatile items such as food and energy slowed to 1.1 per cent .

While the European Central Bank will generally welcome the return of faster

inflation, it has also pledged to ignore short-term spikes this year as it continues to support the economy with a wave of liquidity. – Additional reporting Bloomberg