Prices are set to keep falling

CONSUMER prices are likely to keep falling for the rest of the year, but at a slower pace.

Ireland is the only country in the eurozone where prices are still falling.

According to the latest figures from the Central Statistics Office (CSO) prices were down 2.1% in the year in April, a trend experts say is likely to continue as the year goes on.

Hikes in energy and mortgage costs meant that on a monthly basis, prices were 0.2% higher than in March, the third monthly increase in a row.

This compares with a decrease of 0.8% recorded in April of last year. The rate of deflation peaked at –6.6% in October 2009.

Homeowners on tracker mortgages are also unlikely to see any hike in rates until at least the middle of next year, according to National Irish Bank chief economist Dr Ronnie O’Toole.

He said that because of the Euroland debt crisis and the EU rescue package, it is now unlikely that the European Central Bank (ECB) will increase interest rates before the second half of 2011.

“Previously it had been expected that they would start increasing interest rates at the start of next year. Indeed, the growth and inflation outlook for Europe’s largest economies, particularly Germany, could warrant an earlier increase in interest rates.

“However, the dire debt situation will not allow the ECB to raise rates for a long time.”

Of the 12 categories in the price basket, food, clothing and footwear; household equipment, recreation/culture, restaurants and hotels all saw prices drop last month compared with March.

The price of health, communications and education services was unchanged. The category measuring electricity, gas and other fuel prices saw an increased of 1.5% in the month, while transport was up 0.6%.

In the year, clothing and footwear costs fell almost 11%, while food and non-alcoholic beverages were down 7%.

Following an average drop in prices of 4.5% in 2009, Bloxham expects an average fall in 2010 of around 1.25%.