Irish deflation rate eases in April

The rate at which annual consumer prices are falling continued to moderate in April, with prices 2.1 per cent lower compared to a year earlier, the Central Statistics Office said today.

The latest figures follow a decrease in annual prices of 3.1 per cent in March and 3.2 per cent in February. Deflation peaked at 6.6 per cent in October 2009, and since then the rate of decline has fallen.

Services prices fell by 1.4 per cent in the year to April, while the price of goods fell by 2.9 per cent.

Clothing and footwear fell 10.9 per cent over the year. Prices for food and non-alcoholic beverages were down 7.1 per cent, while furnishings, household equipment and routine household maintenance saw a 4.7 per cent decline in prices.

Education prices rose 8.9 per cent, and increases in the cost of petrol and diesel pushed transport costs up 4.4 per cent over the year.

On a monthly basis, prices rose 0.2 per cent in April compared to March, compared to a decrease of 0.8 per cent recorded in April of last year.

The cost of housing, water, electricity, gas and other fuels rose 1.5 per cent as the price of home heating oil rose and mortgage interest repayments were higher. Transport costs were up 0.6 per cent on the month.

Sales brought down the cost of clothing and footwear by 0.5 per cent over the month, while the lower cost of food and non-alcoholic beverages reduced prices by 0.3 per cent.

"The domestic economy is experiencing no price inflation whatsoever bar energy prices (determined overseas) and mortgages (where banks are raising rates)," Davy analyst Rossa White wrote in a note.

"If the euro weakens further against sterling, as we expect, it will eventually raise Irish import prices. One-third of Irish consumer goods imports come from the UK, but the lag before it hits the CPI is about a year."

There was no change over the month in the EU Harmonised Index of Consumer Prices (HICP), and annual prices were down an average of 2.5 per cent compared with April 2009.

The Irish trend for deflation is in contrast to European prices, where the HICP is increasing by 1.5 per cent in the euro area.

"As such progress in addressing the price gap versus Europe continues to be made, and we estimate that the differential has been narrowed by 6 per cent thus far," said Goodbody analyst Deirdre Ryan.

National Irish Bank said Ireland was showing the way for Mediterranean countries, but said the negative inflation was likely to change in the future.

The Irish Small & Medium Enterprises Association (Isme) called on the Government to reduce State-controlled business costs, including energy, transport and local charges.

"A prime example is the recent decision to allow a carbon tax on gas, which will result in a 6 per cent cost increase to the business sector," said Isme head of research Jim Curran. "These types of irrational decisions undermine business, leading to further company closures and job losses."