Figures released this morning show that the annual inflation rate fell for the seventh month in a row in March to 1.3%, its lowest level for five years.
Consumer prices in March increased by 0.4%, according to the latest figures from the Central Statistics Office. This compares to an increase of 0.8% in March of last year. As a result, the annual rate of inflation fell to 1.3% from 1.7% in February.
Today's figures show that the price of goods has fallen by 0.2% over the past 12 months while the cost of services has risen by 2.8%. This is the first time goods prices have shown negative inflation for 11 years.
Clothing and footwear prices rose in March due to a further recovery in prices after the end of the winter sales. Housing, water, electricity, gas and other fuels also rose with increases in mortgage interest repayments, electricity costs and local authority rents. However home heating oil prices fell last month.
March also saw increases in health and house insurance costs. These were partially offset by falling motor insurance costs.
Consumer price inflation hit a peak of 5.2% last year and has fallen consistently since then.
The CSO said that the EU Harmonised Index of Consumer Prices increased by 0.4% in the month. This compares to an increase of 0.7% in March of last year and as a result the annual rate of inflation as measured by the HICP fell to 1.8%, down from 2.2% in February.
IIB economist Austin Hughes says Irish inflation is now broadly in line with the euro area average for the first time since early 1998.
But he expects inflation to edge higher later this year in line with global trends, though it should remain at 'comfortable' levels for the foreseeable future.
IBEC's David Croughan said the only way to maintain the low rate of inflation was to ensure that it was 'fully reflected' in pay settlements in the coming months.
ISME also welcomed the drop, calling on the social partners to use it as the basis for 'moderate' wage increases in the upcoming partnership negotiations.
The General Secretary of the Irish Congress of Trade Unions David Begg said the drop in inflation was larger than expected but warned that it would rise again later in the year.
He added that the pay talks would have to take workers' productivity, as well as the rate of inflation, into account.
