Clothing and petrol prices still falling but food costs start to creep upwards

SUMMER sales and falling oil prices resulted in lower clothing and petrol prices last month but food costs are nudging up.

Latest figures show consumer prices fell by almost 1% in the year to June, which was the smallest annual drop since January last year.

Prices fell in June by 0.1% when compared with May.

Having peaked at 6.6% last October, the latest consumer price index, released by the Central Statistics Office (CSO), showed a continuation of the easing in the annual rate of deflation.

Clothing, footwear, transport and alcohol costs are still falling but food prices increased slightly, by 0.1% in the month.

In the year clothing and footwear costs are down just over 11%, while food prices are down 5.4%.

Furnishings, household equipment and routine household maintenance costs are 4.6% lower.

In the year there has been a 9% increase in education costs while housing, water, electricity, gas and other fuels are up 5.2%. Transport costs are up close to 3%.

Chief economist with Bloxham stockbrokers, Alan McQuaid said overall inflationary pressures should remain muted during 2010.

“In particular, challenging labour market conditions and declines in disposable incomes will constrain demand and the pricing power of firms. There is also some negative carryover from 2009.

“That said, upward base effects will play a prominent role and will eventually push the headline inflation rate back into positive territory before the year is out,” he said.

Bloxham thinks the first positive year-on-year change in the CPI since December 2008 will come in October.

“The bottom line is that overall prices in Ireland are likely to be lower on average again in 2010. However, the rate of deflation is set to ease considerably this year. Following an average drop in prices of 4.5% in 2009, we are looking for a much more modest annual average fall in 2010 of around 1.2%,” said Mr McQuaid.

In the food sector big increases were seen forcocoa (19%), breakfastcereals (2.4%), coffee (2.2%), pork (2.1%), fresh fruit (1.7%) and cheese (1.7%).

Price decreases were recorded for potatoes (-2.6%), cakes (-1.3%) and fresh fish (-1.1%).


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