Ireland’s inflation rate fell further into negative territory last month, hitting -0.7 per cent, a rate not seen since June 2010.

Worryingly, the fall comes as inflation in the wider euro zone appeared to pick in April on the back of Frankfurt’s historic monetary stimulus programme.

The figures will fuel fears that Ireland’s recovery may still be threatened by deflation, which, in theory, encourages consumers to defer spending.

The latest Consumer Price Index (CPI) indicates the cost of an average basket of goods and services in April was 0.7 per cent lower than a year earlier.

The primary driver of negative inflation here remains falling oil prices which saw transport costs drop 6 per cent on an annual basis.

There was also noticeable decreases in clothing and footwear (-4.5 per cent), food and non-alcoholic beverages (-2.4 per cent) and household equipment and furnishings (-2.4 per cent).

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

“With prices falling into negative territory, the danger is that deflation becomes entrenched in the system, but the fall looks like it will prove temporary, ”Alan McQuaid of Merrion Capital said.

“ Indeed, inflation expectations are now on the rise across the major economies, as evidenced by the sharp pick-up in longer-dated bond yields in the past couple of weeks. But for the time being, negative inflation should be seen as a positive for Irish consumers,” he said.

Investec economist Philip O’Sullivan said: “Given the recent recovery in oil prices from their lows and clear signs of a domestic economic revival - which will, in time, push up on inflation - we would view the recent soft CPI readings as representing a temporary respite for Irish households.”

“Nonetheless, given the still-elevated levels of household debt they are to be welcomed,” he added.