State’s annual inflation rate remains negative at -0.3%

Consumer prices rose last month but not enough to pull the annual rate of inflation out of negative territory.

The latest Consumer Price Index (CPI) suggests inflation stood at -0.3 per cent in May, as against -0.7 per cent in April, -0.6 per cent in March and -0.5 per cent in February.

The State’s headline inflation rate has been negative for the past six months .

The primary drivers of negative inflation were annual decreases in clothing and footwear (-4.2 per cent), food and non-alcoholic beverages (-2.5 per cent) and household equipment and furnishings (-2.3 per cent).

Conversely, there were increases in education (5 per cent), communications (2.1 per cent), housing, water, electricity, gas and other fuels (1.9 per cent), and restaurants and hotels (1.7 per cent).

The latest figures will, nonetheless, ease fears that Ireland’s recovery may yet be hampered by deflation, which encourages consumers to defer spending.

On a monthly basis, prices actually rose by 0.4 per cent in May compared to the previous month, the Central Statistics Office said, driven by increases in petrol, diesel and airfares.

Home-heating oil, rents and hotel accommodation prices were also higher than in April but the price of theatre tickets and the cost of alcohol sold in supermarkets fell.

" Despite the strong recovering economy, domestic inflationary pressures in Ireland are in our view likely to remain fairly well contained in the immediate future," Merrion economist Alan McQuaid said.

“ That said, we do expect some pick-up as the year goes on due to higher oil prices, a gradual rise in wages, and the lower euro pushing up import costs.”

The Irish Small and Medium Enterprises Association (Isme)said the inflation figures confirmed the push for wage increases were “unjustified”.

Isme chief executive Mark Fielding said: “The re-election prospects of the Government have been boosted by the Lansdowne Road Agreement, however, it has also increased the pressure on SMEs to award unjustified and unsustainable pay increases.”

“This wage pressure has been further encouraged by the big business and semi-state lobbyists who certainly do not speak for the SME sector,” he added.