Consumer prices fell 0.6 per cent in March compared with 2014, new data showed, the fourth consecutive month of decline on an annualised basis.
But despite the yearly decline, costs showed a rise compared with February, increasing by 0.6 per cent.
On an annual basis, transport costs were key in driving the index lower, falling 4.9 per cent over the year as petrol and diesel costs fell, while sales contributed to a 4.1 per cent decline in the cost of clothes and footwear. Food prices were 2.7 per cent lower year on year as the cost of products such as bread, cereals and meat fell.
However, the cost of education rose by 4.9 per cent as third level education increased in price, with the water charges and higher rents bumping up costs in the housing sector by 1.8 per cent.
Monthly figures showed a 3.4 per cent increase in transport as airfares rose and fuel prices were higher than the previous month. Prices for clothing and footwear recovered after the traditional winter sales, rising by 1.7 per cent.
The annual rate of inflation for services in the year to March was 2 per cent; goods fell by 3.8 per cent.
The HICP rate, which is used for EU comparative purposes,rose by 0.6 per cent in the month and declined 0.3 per cent in the year.
Merrion Economics’ Alan McQuaid noted inflationary pressures continued to remain fairly weak, and said they were likely to remain contained for some time.
“Indeed, with global oil prices still very weak, Ireland’s annual inflation rate is set to remain in negative territory in the near-term,” he wrote in a note. “ However, we do expect some uptick as the year goes on, with a strengthening labour market/falling unemployment likely prompting a gradual rise in wages, and the depreciating euro pushing up import costs.”
The Small Firms Association said the deflation showed there was no justification for an increase in the minimum wage.
“Despite the significant increase in business activity levels this year, many businesses are struggling to achieve price increases in the marketplace,” director Patricia Callan said. “Price competition in all sectors remains strong and consumers have benefited from this competition.”
The call for restraint in wage increases was echoed by ISME, the Irish Small and Medium Enterprises Association,. The organisation said low levels of inflation “totally negated” the need for any wage increases, and called for employers to resist “ unreasonable and uneconomic” wage demands .
But Investec’s Philip O’Sullivan said although consumer were benefitting from the recovery in the labour market and nascent wage growth, the legacy issue of elevated levels of household debt could not be overlooked when considering the prospects for Irish consumers.
