Weaker-than-expected Irish inflation numbers have been linked to the Brexit-related fall in sterling.
Figures from the Central Statistics Office show consumer prices fell for a fourth straight month in October. The 0.5 per cent monthly decrease was the second largest this year, and came on the back of a 0.4 per cent slide in September.
The latest figures gave rise to an annual rate of deflation of 0.3 per cent.
Inflation had hit 0.5 per cent in July – its highest level in three years – but since then it has fallen back into negative territory, largely on the back of falling transport prices.
The latest monthly decline was also linked to lower motor insurance premiums and cheaper hotel accommodation.
The figures show the cost of car insurance fell 8.2 per cent in October, though it was up 8.5 per cent on annual basis.
Similarly, hotel accommodation prices fell 5.5 per cent in October, but were up 9.7 per cent year-on-year.
The other big changes on a yearly basis were falls in household furnishings (-3.8 per cent), communications (- 2.7 per cent) and clothing and footwear (-2.6 per cent).
“Ireland’s inflation rate is now close to the weakest in the euro area, with sterling’s weakness weighing down on import prices,” Davy analyst Conall Mac Coille said.“ However, this should help Irish consumer spending in 2017, engendering real income gains for consumers.”
Well contained
Alan McQuaid of Merrion Stockbrokers said: “Despite the booming Irish economy, inflationary pressures as measured by the headline CPI [consumer price index] should in our view remain fairly well contained in the immediate future.”
That said, the cost of services like insurance and education are likely to remain elevated, he said.
Mr McQuaid said oil prices would be critical in determining the headline inflation outlook over the next 12 months, “but they remain volatile and hard to predict given the uncertainty over potential Opec output cuts”.
Oil prices steadied on Thursday as markets recovered from their initial shock at Donald Trump’s surprise victory, but investors were cautious ahead of a key Opec meeting to decide on production.
The oil market is heavily oversupplied, and investors are focusing on a gathering of Opec countries at the end of the month which may lead to output cuts.
