Consumer prices fell slightly in June, only the second month this year to see costs come down, official figures revealed today.
Goods and services fell by just 0.1% but over the year prices were down 0.9%, according to the Central Statistics Office.
The CSO said a fall in the cost of clothing, transport and wine had the biggest impact on the monthly report.
The CSO also reported an increase in the amount of trade being done by high street stores and car showrooms.
It said the volume of retail sales, which does not take prices into account, increased by 3.5% in May compared with the same month in 2009.
Car dealers reported a massive jump in sales – up more than a fifth over the year – while clothing and footwear stores also enjoyed a big boost in sales of 13%.
The CSO warned however that the actual value of business fell by 0.1% in the year to May.
Business groups gave a mixed reaction to the data, insisting that more had to be down to address business costs and the jobs crisis.
Commenting on the inflation figures, Avine McNally of the Small Firms Association said that the key falls in costs were occurring in a narrow range of goods, i.e. clothing, food and beverages.
"While these falls are positive for consumers they are not helping struggling small businesses," McNally said, pointing out that inflation was being driven by increases in the cost of public utilities.
ISME also said economic growth was being undermined by increasing "Government-influenced" business costs.
“Irish businesses have cut their controllable costs to the bone but are still hampered by increased state costs, particularly in the areas of energy, waste, local charges and transport," ISME Chief Executive Mark Fielding said.
“High state costs are the ‘Achilles heel’ of the business sector, who have been striving to remain competitive by driving down their own costs, while at the same time, the State increases its costs to business."
However, Fielding said, "it is still not too late for the Government to ensure that state costs are reduced below that of our international trading competitors, which would at the very least provide us with the opportunity to compete and start growing the economy."
Employers' group IBEC said that despite some further modest recovery indicated by the retail sales figures, trading conditions remained very difficult for Irish retailers during the second quarter of the year.
"The average fall in turnover from peak to trough right across the retail sector is now in the region of 25% and this provides a very difficult trading environment for retail businesses," IBEC senior economist Fergal O'Brien said.
"Costs have not fallen by anything close to this and the viability of many retail businesses will remain under threat until a commensurate cost adjustment takes place in areas such as rent, commercial rates and labour costs.
"It is clear that although the Irish consumer is not as fearful as during 2009, the pace of consumption recovery will remain fairly modest until some headway is made in addressing the jobs crisis."