The annual rate of inflation fell last month to 4.2%. July's sales saw clothing and footwear prices slashed by 11% with furniture and oil prices also falling.
This normally helps lower the rate of inflation at this time of year but this July's drop was bigger than last year's, knocking almost 0.5% off the annual rate.
But the upward trend in the price of services continues. The cost of eating out, hotel charges and drink prices all increased. Many food items also went up.
Despite last month's fall, Ireland's inflation rate remains 2.5 times higher than the eurozone average.
Reacting to the news, Fine Gael's Richard Bruton said that continuing high rates of inflation in key sectors were threatening Ireland's competitiveness.
He accused the Government of "disturbing complacency" about what he termed embedded inflation.
Mr Bruton claimed that one of the most significant sources of inflationary pressure arises from the mismanagement of public finances, with spending racing ahead of revenue, threatening to undermine Ireland's long-term competitiveness.
