SERVICES CONTINUES to account for the bulk of the growth in inflation, according to figures published yesterday by the Central Statistics Office.

Data for November, released yesterday, showed that the annual rate of inflation in services was 4.2 per cent compared to just 0.4 per cent in the goods sector.

A sharp fall in the price of fuel was a contributory factor in driving the consumer price index to 2.5 per cent last month from 4 per cent in October.

On a monthly basis, prices were 0.9 per cent lower in November than in the previous month, with price decreases also reported in average mortgage interest repayments, private rents, home-heating, and air fares among other areas.

The largest monthly price decline, of 5.4 per cent, was recorded in the housing category, as consumers benefited from both falling rental rates and mortgage interest costs, due to the European Central Bank's interest rate cuts.

Goodbody economist Dermot O'Leary expects that housing will "go deeply into negative territory in 2009" as the ECB continues to cut interest rates, while further falls in high street prices are also expected, due to sterling depreciation and a deteriorating outlook for Irish consumer spending.

However, there were increases in car maintenance costs and taxi fare charges in the month, and the price of cigarettes and other tobacco products rose on the back of excise duty changes announced by the Government in the Budget.

The cost of food and non-alcoholic beverages also rose during the month, advancing by 0.5 per cent to bring the annual rate up to 4.0 per cent.

The latest statistics give further evidence of a weakening in consumer demand.

Although prices in the clothing and footwear category increased by 1.3 per cent from October to November, prices fell by 7.2 per cent in the year to November, the fastest rate of decline since January 2003.

Fiona Reddan