THE cost of living experienced its biggest drop in more than 75 years over the past 12 months, according to figures released by the Central Statistics Office yesterday.
Consumers are still paying more for insurance, alcohol and childcare but food, electricity, gas and rent prices have plunged over the last year.
The rate of inflation, which measures the cost of living, has dived by 4.7%, the most since 1933, in the year to the end of May.
With prices down by almost 5%, consumers are now paying the same prices for products as they were six years ago.
A European measure of prices shows they fell by far more in Ireland than in any other European country. In the year to April 2009 prices in Ireland were down by 0.7%. That compares to a hike of 2.3% in Britain, 4.3% in Poland and 4% in Malta. In Romania they rose by 6.5%.
Analysts said the drop in prices here will help restore Ireland’s competitiveness and boost the economy.
The main drivers in the falling rate of inflation are drops in mortgage interest relief, food and rent prices last month. A drop in gas and electricity costs also made significant contributions.
This time last year the European Central Bank (ECB) interest rate stood at 4.25% but following a raft of cuts over the year it now stands at 1% resulting in a 42% drop in interest costs for homeowners on variable loans.
Falling prices “will generate a boost in economic activity and return Ireland’s competitiveness back towards the euro-area average”, said Brian Devine, chief economist at NCB stockbrokers.
Although costs are down over the year consumers are being forced to pay more for alcohol and cigarettes, which are up 8%, doctors fees (up 2.2%), bus fares (up almost 11%) and taxi fares which have increased 8.2%. Restaurant prices are also up 2% over the year while beauty treatments increased 2.5%.
Insurance costs are up a whopping 18.7% in the year, with house insurance being particularly hit, soaring almost 25%.
Big drops were seen in clothing, down 11%, shoes down 10% and rents costs down 16.4%. Also prices for flights have dropped 9.4% and sea transport plunged 14.5%.
With the cost of oil having dropped about 50% below its July 2008 record price, petrol prices have fallen by 11.5% in the year and diesel costs by almost 27%. However in the month petrol costs have nudged up 3.3% from April.
In the year toy prices are also down almost 12% while hotel costs have dropped by 12.4%.
Davy economist Rossa White said that the positive aspect of the recession is that domestically generated price pressures, which have persisted for many years, are finally subsiding.
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