Inflation falls to two-year low of 0.8%
The cost of living has fallen to its lowest level for more than two years with declining energy prices pushing inflation under 1 per cent in November.
The latest figures from the Central Statistics Office (CSO) put the rate of inflation in the year to the end of last month at just 0.8 per cent, down from 1.2 per cent the previous month.
It is now less than a third of the annual rate of inflation recorded in the 12 months to the end of November 2011, when consumer prices rose by 2.9 per cent.
The single biggest factor in the falling prices was a 1.9 per cent decline in transport costs as a result of lower petrol and diesel prices and cheaper air fares.
Lower than EU average
Prices also dropped across the restaurant, hotel and telecommunications sectors. The cost of communications fell 4.4 per cent while housing, water, electricity, gas and other fuels were 3.1 per cent cheaper the previous month.
The cost associated with running a house, including maintenance and furniture, was down 2.9 per cent. Education costs increased by 4.7 per cent. The cost of alcohol and tobacco was up 3.5 per cent while housing costs climbed 0.3 per cent as a result of higher mortgage interest repayments.
Irish inflation is now significantly lower than the EU average, according to the Harmonised Index of Consumer Prices, which strips out mortgage increases and is used for making price comparisons across the EU. It showed prices in the Republic falling 0.5 per cent last month. The annual rate of change saw prices climb 1.6 per cent on the same period last year. This compares with a rate of inflation across the euro zone over the past 12 months of 2.2 per cent.
While the year-on-year fall in the cost of living will offer some relief to hard-pressed consumers, it is unlikely to last and will be more than offset next month when the cuts announced in last week’s budget kick in.
“Overall it’s a positive. It will make it much easier for people to cope,” said Alan McQuaid, an economist at Merrion Stockbrokers.
“CPI has fallen in five of the last six months but we would see the rate of inflation picking up over the next few months,” said Philip O’Sullivan, chief economist with NCB.
“It’s good for consumers strapped by austerity, but for the overall economy, I don’t think it’s significant enough to change the overall trajectory.”