DEFLATION IN Ireland reached record levels in October, with the annual decline in consumer prices hitting 6.6 per cent on average, according to the latest figures from the Central Statistics Office (CSO).

In the most sustained period of deflation the economy has endured since the early 1930s, prices in a number of areas, including housing, clothing and furnishings, declined considerably over the 10-month period to October.

The cost of housing and utilities fell by 28.8 per cent in the year to the end of October, while clothing and footwear costs fell 12.8 per cent. There was also a 6.4 per cent decline in the cost of food and non-alcoholic beverages, and a 4.1 per cent drop in prices paid for furnishing and household equipment.

However, there was an 11.2 per cent rise in education costs in the year to October, highlighting an increase in Government-managed costs despite the deflationary environment. Alcohol and tobacco also rose by 7.1 per cent, while there was a 3 per cent rise in health costs over the year.

Fine Gael deputy leader and spokesman on finance Richard Bruton said the rise in State-regulated costs was further evidence that the Government was “ripping-off” Irish families and delaying recovery in the Irish economy.

“The poorest and most vulnerable families in Ireland are not benefiting to the same extent from the fall in the cost of living. The Government needs to end the rip-off and improve our national competitiveness by cutting costs and prices, particularly electricity, education, transport and health.”

Employers’ group Ibec said Ireland must take advantage of the period of deflation to mark a return to competitiveness. Ibec senior economist Fergal O’Brien said: “It is vital that these price falls fully translate into cost reductions for businesses so that Ireland can regain its competitive edge.”

Mark Fielding, chief executive of the Irish Small Medium Enterprises Association (Isme), called on the Government to revise its own cost base, including public sector pay, to help companies survive the recession. “While the overall economy is currently experiencing negative inflation, companies are still exposed to ‘Government-managed’ cost increases, including local authority charges, energy and waste, which undermine the ability of companies to survive during the recession.”

Retail Ireland, the Ibec group representing the Irish retail sector, said the CSO figures highlighted the aggressive cost-cutting and consumer-value initiatives undertaken by the sector over the past months.

The group called on the Government to decrease VAT, reduce excise duties on alcohol and cut State-controlled costs in order to further stimulate retail sales.