Consumer prices fell by 0.2 per cent last month and were on average 6.6 per cent lower than in October 2008, according to new figures from the Central Statistic Office (CSO).
This is the most sustained period of deflation the economy has endured since the early 1930s as prices for housing, clothing and furnishings have dropped considerably.
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, suggesting an increase in services provided by the Government 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.
Service prices fell by 7.7 per cent in the 12 months to the end of October, while goods fell by 5.2 per cent.
The most significant monthly prices changes in October were recorded in the cost of transport, furnishings, and clothing. During October, education costs rose 10.9 per cent.
Fine Gael deputy leader and spokesman on finance Richard Bruton said the rise in State regulated costs was evidence the Government was ripping-off Irish families and delaying recovery.
“The poorest and most vulnerable families in Ireland are not benefiting to the same extent from the fall in the cost of living,” he said.
Employers’ group Ibec said Ireland must take advantage of the current period of deflation to restore competiveness.
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 cost base, particularly public sector pay, in order 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,” he said.
Retail Ireland, the Ibec grouping representing the sector, said the CSO data highlighted the aggressive cost-cutting and consumer value initiatives undertaken by the sector over the past months.
Retail Ireland director Torlach Denihan said: “Over the last year consumers have benefited from price falls…. despite these price falls, retail sales are poor and 30,000 former retailer workers joined the live register over the last year.”
“The Government must take decisive action to support employment in the retail sector and address the serious problems of flat consumer demand, cross-border shopping and an uncompetitive cost base. Landlords must also face up to their responsibilities and cut rents,” he said.
Although last month’s decline of 0.2 per cent on September was the smallest month-on-month reduction seen this year on the Consumer Price Index (CPI), a marked increase in college registration fees countered what would have been an even larger decline on the index.
VicepPresident of the Union of Students in Ireland Dan O’Neill said: “It is startling that the price of education has gone up when consumer prices in general have gone down, particularly at a time when students and their families, like everyone else, are struggling with the recession.”
Goodbody economist Deirdre Ryan said the decline in consumer prices indicated Ireland was regaining competiveness and offered evidence the pace of deflation had reached a high watermark.
“The index is back to levels last seen in early 2007, and although the rate in decline is at a record high, we anticipate that the annual rate of decline consumer prices won’t extend much further and that the average annual rate of decline will be somewhere near the 4.4 per cent mark,” she said.
The CPI excluding tobacco for October decreased by 0.3 per cent in the month and was down 7.2 per cent in the year. The CPI excluding energy products index recorded no change during October but decreased by 6.2 per cent over the 12-month period under review.
Lastly, the CPI excluding mortgage interest decreased by 0.3 per cent in the month and was down by 2.4 per cent in the year ending October 31st.