Prices fall 2.6% in 12 months

Consumer prices fell 2.6 per cent in the year to March to reach levels last seen in the 1930s, according to data released by the Central Statistics Office (CSO) this morning.

Prices showed no change between February and March compared to an increase of 0.9 per cent in March 2008.

This brought the annual rate of inflation to -2.6 per cent compared with -1.7 per cent in February. The rate of consumer price inflation turned negative in January. The last time inflation was -2.6 per cent was in the third quarter of 1933.

The reductions mean prices have returned to August 2007 levels.

In his Budget speech on Tuesday the Minister for Finance Brian Lenihan said the Government was expecting inflation to average -4 per cent this year and that this decline would help offset the impact of the tax increases.

Falling mortgage bills following a series interest rate cuts by the European Central Bank rates has been one of the most significant contributors to easing of consumer prices.

Last month mortgage repayment costs declined 3.2 per cent to bring the annual fall to 29.1 per cent.

Rental accommodation costs increased marginally last month, rising by 0.4 per cent but remain 13.8 per cent lower than in March 2008.

While much of the deflation rate can be attributed to the ECB interest rate cuts other sectors of the economy are still recording rising prices.

Over the year alcohol prices have risen almost 6 per cent, health prices are 4.7 per cent higher while education prices gained 5.5 per cent.

A basket of miscellaneous goods, including car insurance, home insurance and toiletries has risen 9.1 per cent over the last year.

The small and medium enterprises' representative body Isme said falling costs need to be passed on to businesses.

Jim Curran. Isme head of research said small businesses “have yet to witness any benefit from the reduction in inflation due to the high level of business costs.”

“This is completely unacceptable as many of the costs militating against business are state controlled, including local charges and energy. If anything, the Minister scored an ‘own goal’ in the recent budget, exacerbating the problem, with ludicrous increases in diesel and the insurance levy”.