The Irish economy is currently in deflation. (See what we did there?)

Image: crdotx via Flickr

THE COST OF LIVING in Ireland fell by 0.5 per cent last month, according to new data published this morning.

The Central Statistics Office said the consumer price index had fallen – following on from a 0.3 per cent drop in December – but that the cost of living remained 2.2 per cent higher in January 2012 than it had been a year earlier.

The main drop came in the price of clothing and footwear, which fell by 10.7 per cent last month, while the cost of household furniture fell by 2.5 per cent and housing itself, as well as the cost of utilities, dropped by 1.6 per cent.

The cost of alcohol and tobacco rose by 3.5 per cent, meanwhile – largely as a result of new excises levied in December’s Budget – while the cost of transport also rose, by 1.2 per cent.

On an annual basis, the cost of education had risen by the highest amount, at 8.9 per cent, while the cost of utilities and housing was up by 6.7 per cent over the course of the year. and the cost of alcohol and tobacco was up by 3.8 per cent.

Retail Excellence Ireland said the figures reflected the habits of consumers who are buying less, and making more of an effort to seek out lower prices for some goods.

“Consumer sentiment remains at very low levels, significantly affected by the ongoing Eurozone crisis and repeated negative commentary regarding domestic austerity measure,” said its chief executive David Fitzsimons.

His ISME counterpart Mark Fielding said inflation was being regularly eclipsed by the cost of running a business, and that small businesses did not have “the price setting ability to increase prices to compensate for rising state influenced costs”.

This would lead to job losses and company closures, he said.

When measured on a harmonised European basis, Irish inflation for the twelve months to January 2012 stood at 1.3 per cent – just under half of the eurozone average of 2.7 per cent.

Read: ECB interest rates remain unchanged >

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