Inflation hits five-year low as lockdown pushes prices lower

Consumer prices were 0.5 per cent lower in May compared with the same month last year as the cost of clothing and footwear, communications, household furnishings, housing and fuel all fell.

In inflationary terms, this constituted a five-year low.

But economists have questioned the validity of the latest numbers with so much of the retail sector effectively closed on account of the pandemic.

The latest consumer price index from the Central Statistics Office (CSO) suggests an average basket of goods and services in May was 0.5 per cent lower than a year ago.

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This marks a change from earlier in the year when prices were rising at a rate of just over 1 per cent in annual terms.

The latest figures, however, encompass the imposition on restrictions to suppress the Covid-19 virus, which has curtailed consumer spending and turned inflation into deflation.

With department stores and other non-essential stores closed, the average cost of clothing and footwear fell by 5.4 per cent, while the cost of communications, which covers phone bills, dropped by 5.3 per cent.

The cost of furnishings, household equipment and routine household maintenance was down 3 per cent while housing, water, electricity, gas and other fuels were down 2.7 per cent.

Falling oil prices contributed to a fall in the cost of transport (-2.2). Within this category, however, diesel and petrol prices were both down about 10 per cent on an annual basis.

Conversely, there were increases in education (4.1 per cent), alcoholic beverages and tobacco (3.4 per cent), recreation and culture (1.4 per cent) and health (1.4 per cent).

May also saw increases in health insurance premiums, which rose by 7.8 per cent year on year.