Annual inflation remains steady at 0.2 per cent

Annual inflation remained steady in September at 0.2 per cent, despite a marginal fall in prices of 0.1 per cent in the month.

The annual rate is the same as it was in August, the lowest in two years, figures published by the Central Statistics Office today show.

The cost of alcoholic drinks and tobacco experienced the biggest annual rise at 4.8 per cent, due to higher prices for alcohol sold in off-licences and supermarkets, and higher tobacco prices.

Rising alcohol prices also had an impact on the hospitality sector, with the cost of restaurants and hotels increasing 0.25 per cent in the year.

The miscellaneous goods and services category saw prices increase by 2 per cent, due to higher health insurance premiums, the CSO said.

The cost of education also increased significantly in the year, showing a 4.8 per cent rise.

The communications sector experienced the biggest price drop at 4.5 per cent over the year, followed by clothing and footwear at 4.1 per cent, and furnishings, household equipment and maintenance at 3.9 per cent.

The cost of transport fell by 2.7 per cent in the 12 month period, mainly as a result of lower petrol and diesel prices and a decrease in airfares.

"Domestic inflationary pressures in Ireland are likely to remain depressed for some time to come," Merrion Stockbrokers economist Alan McQuaid wrote in a note.

“Continued weak consumer demand will in general put downward pressure on prices in the months ahead.”

He said austerity measures announced in last year’s budget, particularly the property tax, had hit disposable incomes, which was having a negative impact on consumers’ spending power.

“It looks like deflation rather than inflation is the bigger threat to the economy, which is one reason why the Government should try and introduce some stimulus measures in the forthcoming budget,” he added.

Average prices for September fell by 0.1 per cent overall. The most significant monthly price drops were in communications, which fell 3.3 per cent, and food and non-alcoholic beverages, down 0.7 per cent.

Increases were recorded in the price of clothing and footwear, which rose 3.9 per cent in the month, and housing, water, electricity and gas, up 0.4 per cent.

Chief executive of the Irish Small and Medium Enterprises Association Mark Fielding said although overall inflation remains low, the cost of doing business is rising, which is having a detrimental effect on employment growth and competitiveness.

“If the Government wants to see increased employment and economic growth in the coming year it must use the budget as an opportunity to assist SMEs and drive down the cost of doing business,” he said.

“State imposed costs such as utilities and local authority rates, in particular, continue to negatively impact business as SMEs have already cut controllable costs as much as possible.

“Issues such as the two-tier electricity system and excessive legal fees must be addressed and a tax initiative introduced for those lumbered with upward only rents on legacy leases.”