Cost of living is down for the first time in four years
Published 14/03/2014 | 02:30
THE cost of living has fallen for the first time in nearly four years.
Central Statistics Office (CSO) figures show prices were 0.1pc lower in February than a year earlier, driven mainly by falling transport, food, furniture and phone costs.
This is the first time that the annual inflation rate has fallen since July 2010, prompting businesses to warn against what it said were unwarranted wage hikes that could stifle recovery.
Prices rose by 0.5pc in February compared with the previous month mainly due to the end of the winter sales pushing clothes and shoe prices back up, and to an increase in air fares and hotel prices.
However, they were still down 0.1pc on the same time last year, whereas the annual inflation rate for each of the past three years had been between 0.5pc and 2.6pc.
This dip in inflation was helped by welcome falls of close to 5pc in the price of petrol and diesel in the past year.
However, economist Alan McQuaid of Davy stockbrokers warned that the crisis between Ukraine and Russia might lead to higher world oil and energy prices this year, as might the stronger world economy.
But sluggish consumer demand combined with the first full year of the property tax would continue to put downward pressure on prices at home, he said.
"At this point in time it looks like disinflation/deflation rather than inflation is the bigger threat to the economy and it is not just in Ireland."
Though postal prices rose 7pc in the past year the price of phone services fell by 4.5pc in the same period, CSO figures show.
Food prices fell by 1.7pc, helped by an 18pc fall in the cost of potatoes, though alcohol prices rose by more than 3pc. Homeowners have benefited from a 10.5pc decrease in mortgage interest repayments in the past 12 months, whereas those renting have seen a 10.2pc increase.
The Irish Small and Medium Enterprises Association (ISME) said low inflation removed the usual trade union justification for wage increases which would only damage economic revival. It said that businesses still faced a high-costs environment.
KBC Bank economist Austin Hughes noted there had also been a notable drop of 0.6pc in consumer spending shown in the latest GDP figures also published yesterday.
"While we didn't anticipate a surge, we are somewhat surprised by this number. That said, it does caution that for most households spending power remains constrained," he said.