HEADLINE INFLATION eased to 1.6 per cent over the year to September, falling from the 2 per cent level recorded in August, new data from the Central Statistics Office showed.

The decline followed an increase in the cost of living in August, when prices rose by 2 per cent year-on-year.

The CSO highlighted increases in September in the cost of education and transport, which rose by 9.6 per cent and 7.9 per cent respectively over the year, as key factors in pushing Irish prices higher.

Those rises were partially offset by a decrease in the cost of housing and utilities, which was 2.8 per cent lower compared with September 2011; and communications, which fell by 2.6 per cent.

But although consumers were cheered by the European Central Bank’s decision to cut interest rate, bringing some relief to tracker mortgage holders, rising energy prices were likely to have piled pressure on struggling consumers.

“The upward pressure on energy bills is likely to continue, with a number of energy providers set to increase prices over the coming months,” Goodbody economist Juliet Tennent said.

Headline inflation eased month on month, with prices falling by 0.1 per cent in September compared with August.

Over the month, the cost of transport was 1.1 per cent lower, as the price of air fares fell by almost 17 per cent.

Fuel costs were higher, however, with both petrol and diesel rising by 3 per cent.

Transport costs are set to increase further for hard-pressed motorists and businesses.

The National Roads Authority is to meet next week to discuss an increase in road tolls, and it is widely believed that a 10 cent rise will be implemented from January 1st. Independent operators are expected to follow suit.

Clothing and footwear prices rose by 2.9 per cent in September as the traditional seasonal sales came to an end.

Garments and accessories showed the highest jump, rising by 3.5 per cent and 2.1 per cent respectively, with footwear rising by 0.9 per cent.

The annual rate of inflation for services was 1.2 per cent, with goods rising by 2 per cent.

The HICP rate, which is used for EU comparative purposes and eliminates certain items such as mortgage interest and motor tax, rose by 2.4 per cent over the year, falling from the 2.6 per cent rate recorded in August.

“Looking ahead, announced increases in mortgage costs, energy prices and public transport fares will place upward pressure on overall consumer prices over the coming months,” NCB chief economic Philip O’Sullivan said.

“This pressure, allied to the further tax increases planned for December’s budget, will act as a headwind to consumer spending growth for some time to come,” he predicted.

Merrion stockbrokers predicted an average rise in prices of 1.9 per cent for the year, compared with 2.6 per cent in 2011.

“Still, it would be the second year in a row of an overall increase in the consumer price index after the two deflationary years of 2009 and 2010,” said economist Alan McQuaid.

He predicted a further decline to 1.6 per cent in 2013.