Inflation plunges in July and may move even lower
Inflation hit a 12-month low in July, dragged down by a drop in costs for telephone equipment and services and by weaker oil prices, according to the Central Statistics Office.
Data showed that inflation fell by 0.2pc in July from June and was up by just 0.5pc over the past 12 months.
“Despite the strong economy, I think price pressures are likely to remain muted. This was the lowest annual inflation rate since June last year and I reckon it will drop closer to zero before year-end,” said independent economist Alan McQuaid.
“Online shopping has a lot to do with it and retailers are clearly under pressure,” said Mr McQuaid who is forecasting annual inflation of 0.6pc for this year.
Inflation across the eurozone has been weak and stuck well below the European Central Bank’s 2pc target for more than five years.
Weak price pressures are among the reasons behind plans from the ECB to cut interest rates and reintroduce bond purchases, a move that could come as early as September.
Despite the sharp decline in the headline rate of inflation, which was running at a positive 1.1pc in June, services inflation continued to show robust growth at 0.6pc on the month and 2.2pc over the 12 month period.
Inflation in Ireland has run below the eurozone average, thanks in part to a weak pound which has cut the cost of imports from the UK. The eurozone rate of inflation was 1.1pc in July, according to an initial estimate by Eurostat, down from 1.3pc in June.