Inflation inched up slightly last month but overall levels remained low compared with much of the rest of the EU.

The Central Statistics Office (CSO) said yesterday that annual inflation rose from 2.1 per cent in March to 2.2 per cent in April, with the cost of housing the biggest driver behind the increase.

Home heating oil rose by 16.5 per cent as suppliers passed on higher global oil prices, while electricity was up by 4 per cent on the back of higher prices approved by the energy regulator for the start of the year.

Mortgage interest repayments increased by 1 per cent.

The figures also show that the divergence between inflation for goods and services was sustained last month, with goods' prices rising by just 0.7 per cent while the price of services increased by 3.7 per cent year-on-year.

Eugene Kiernan, head of asset allocation with Irish Life Investment Managers, said this "dichotomy" was best summed up by a breakdown showing that the cost of buying new shoes is down by 4 per cent, while the cost of getting them repaired has climbed by 5 per cent.

"It's on the services side of the economy that we're seeing the price pressures," said Mr Kiernan. Even with this, however, the overall inflation rate remains "reasonable", he added.

Small business lobby Isme was not so comfortable, claiming that the headline rate of inflation is "masking an underlying threat of dramatic cost increases to small business".

These threats are particularly live in energy costs and local charges, according to Isme chief executive Mark Fielding.

He pointed out that local Government charges have increased by 18 times the rate of inflation over the past year.

"If the Government had not intervened by approving increased costs for public utilities, the rate of inflation would be significantly lower," said Mr Fielding.

Price increases were also higher than average in education, health and restaurants. The cost of transport rose due to higher prices for petrol and diesel.

Bloxham Stockbrokers chief economist Alan McQuaid predicted that, in general, price pressures will remain quite subdued over the remainder of the year.

He has cut his 2005 inflation forecast from 2.5 to 2.25 per cent, even though he believes the strength of the labour market and a projected recovery in consumer spending will lead to further services inflation.