Cost of living falling at fastest pace since 1930s

THE cost of living is falling at the fastest rate since 1933 driven by a 47.5% fall in mortgage interest costs and a 16.4% drop in rent.

Food, clothes, petrol and footwear costs have all fallen over the last year as figures from the Central Statistics Office (CSO) show prices are down 5.9% in the last year.

Ulster Bank economist Simon Barry said prices are likely to drop further in the coming months.

“Beyond that, we do expect underlying price pressures to remain very subdued reflecting the still-weak economic outlook.

“However, we anticipate that downward pressure on headline inflation will subside in the final quarter of this year and beyond,” he said.

Mr Barry said the reasons for this is that crude oil prices, which have more than doubled over the past eight months will exert upward pressure on energy prices at the retail level.

Also he believes the European Central Bank (ECB) has come to the end of its rate-cutting cycle, so the annual declines in mortgage interest will become much smaller over the coming months.

In the food sector the big price drops were seen with a 7.7% fall in the price of flour, a 10.4% drop in poultry, 6.9% for fruit and 4.6% for vegetables.

Alcohol, however, is up 2.8%, beer up 4.4% and wine and cider is up 2.4% over the year. However, footwear prices are down almost 11% and clothing 11.2%.

There were large increases in the cost of insurance, with motor cover rising 13.6%, although motor cycle insurance was down almost 20%.

Health insurance is up 21% and house insurance is up 26.2%.

Small business group, ISME said the Government must immediately reduce the cost of public services.

ISME chief executive Mark Fielding said the figures show a “parallel universe” whereby prices in the private sector have been reducing since late last year, but the cost of public services continues to increase.

“Nowhere is this more evident than in the areas of health, education and local charges. The reality is that the private sector continues to pay for the profligacy of the public sector,” he said.

Although petrol prices are down 13.6% over the year and diesel costs are down 27.5%, a survey released by the AA found that prices of petrol and diesel remained very high in the last month, adding that there is little relief in sight.

Director of policy at the AA Conor Faughnan said: “The reason is international oil prices. A barrel of crude oil now costs over $70, as opposed to $33 last Christmas. In fact, were it not for the dollar’s weakness against the euro our fuel prices would be a lot higher.”

The cost of rail travel is up 8.7% over the year, taxi prices are up 8.2% and bus travel is up almost 11%. Air travel, however, is down 12.5% and sea transport down just over 23%.

Consumer prices, based on a European Union measure which excludes mortgage interest, fell 2.6% in July from a year earlier, the most since the data series began in 1997.