THE cost of living fell over the last year at a rate not seen since the 1930s, as mortgage costs, petrol and electricity prices plunged.
According to the Central Statistics Office, inflation fell to -2.6% in the year to March, with prices set to fall further and the rate of inflation expected to average -3.5% this year.
Homeowners can also expect a further drop in mortgage interest rates next month with the European Central Bank tipped to cut rates by 0.25% to a record low of 1%.
Although the 29% annual drop in mortgage interest rates was the main reason for the fall in prices in March, a 14% drop in rents, 17% fall in electricity costs and a 14% fall in petrol also contributed.
The March fall was the greatest drop in prices since 1933.
However, clothing and footwear prices rose by 4.6% in March. On an annual basis however clothing and footwear costs are down 8%.
“This is really strange but may represent attempts by distressed retailers to recover some lost margin after years of falling prices. If so, they seem doomed to failure, given the weakness in the broader economy,” said Ulster Bank chief economist, Pat McArdle.
He said the sharp fall in prices over the coming months will alleviate some of the pain being felt by those who are suffering from income cuts, said Mr McArdle.
Analysts expect prices to plunge 5% in the next few months.
Bank of Ireland chief economist Dan McLoughlin said the fall in prices will be one of the few things supportive to a household sector hammered by little or no wage growth, or in some cases wage cuts.
In the year to March, prices in the food and drink sector fell an average 0.5%, with breakfast cereals down 7%, fresh fish down 5% and coffee down 3%.
There was also a 2% fall in nightclub prices, a 9% drop in the cost of shoes, a 5% drop in furniture and cars down 6%.
Prices for spirts were up 1%, wine and cider up 3% and beer up 5%. Cigarette costs jumped 8.5%.
Medical fees all increased over the year. The biggest hike in prices was in the insurance sector.
While air fares plunged 22% in the year, taxi costs were up 8% and bus fares up 13%. Petrol and diesel costs were down 14% and 23%.
Small business group ISME head of research Jim Curran said: “The minister scored an own goal in the recent budget, exacerbating the problem, with ludicrous increases in diesel and the insurance levy.”
© Irish Examiner Ltd. All rights reserved