New figures from the Central Statistics Office show that consumer prices on average were 1% lower in August compared with the same month last year.
This marked the sharpest annual fall since 2010, when the economy was hit hard by the global financial crisis.
Consumer prices have dropped on an annual basis for five months in a row since the economy first went into lockdown due to Covid-19.
They were 0.1% lower on a monthly basis in August as the full reopening of the economy was kept on hold.
The CSO said one of the main reasons for the decrease was a 4.4% fall in transport costs due to a reduction in air fares and lower prices for diesel and petrol. These decreases were partially offset by a rise in the cost of cars and higher prices for services in respect of personal transport equipment.
Communication costs fell by 8.4% while August also saw a reduction in the price of home heating oil, lower rents and a fall in the cost of electricity and gas. This reduction was partially offset by higher mortgage interest repayments, the CSO added.
August also saw lower prices for a wide range of foods including vegetables, sugar, jam, honey, chocolate and confectionery and mineral waters, soft drinks as well as fruit and vegetable juices. A 3.2% drop in the prices of clothing and footwear was also reported.
As Covid-19 restrictions reduce, the CSO said the continued unprecedented changes in household consumption patterns have also been reduced during August compared to recent months.
It was estimated that households, on average, were unable to consume 2.7% of the goods and services in the Consumer Price Index basket of goods and services in August.
These mainly consisted of the following items included in the CPI - package holidays, nightclubs and theatres.