Consumer prices stabilised in July, remaining unchanged from June and falling only 0.1 per cent compared with the same month last year.
Cheaper clothing and footwear driven by sales was offset by a 2.8 per cent rise in the cost of communications, as mobile phone and landline charges rose. There was a 0.5 per cent rise recorded in the cost of miscellaneous goods and services, with home insurance blamed for the rise, and a similar rise in the cost of alcohol and tobacco, and health.
The latest figures show a further slowing of the pace of deflation on an annual basis. In June, prices fell 0.9 per cent compared with the previous year, while May recorded a decrease of 1.1 per cent.
Deflation peaked in October last year, when prices were down an average of 6.6 per cent, and has slowed steadily since then.
The yearly decline was led by a fall in the price of clothing and footwear, which declined 8.5 per cent in the year, while food and non-alcoholic beverages were 3.8 per cent cheaper than the same month in 2009. Furnishings, household equipment and routine household maintenance cost 3.4 per cent less than last year.
However, these decreases were offset by the 9.2 per cent rise in the cost of education, a 5.5 per cent rise in housing, water, electricity, gas and other fuels, and a hike in the cost of transport of about 2.7 per cent.
Services cost 1.4 per cent more than last year, but the price of goods fell 2 per cent.
The EU Harmonised Index of Consumer Prices (HICP) fell buy 0.1 per cent in the month, and 1.2 per cent year on year.
Commentators said the figures presented mixed news.
"While further price falls would help Ireland regain competitiveness, at least the slow-down in deflation suggests that demand is stabilising," said Davy analyst Aidan Corcoran.
He pointed out that core CPI, which excludes mortgages, food and energy, fell 1.7 per cent annually, up from a decline of 2.4 per cent in the year to June.
Food prices rose for the third month in a row, the first time the trend has been seen since 2008. "We expect the weakening euro and adverse weather conditions to support food prices in the coming months," Mr Corcoran said.
The Small Firms Association (SFA) said the figures showed the key fall in costs occurred in a narrow range of goods, and although good for consumers, they were not as positive for struggling small businesses.
"The most worrying aspect is that, for the main part, inflation is being driven by increases in public utility costs, such as education, housing, water, electricity, gas and transport, and these costs are daily input costs for businesses," said director Avine McNally.
"Structural and policy changes are necessary to ensure prices remain low and do not increase when economic growth returns."
The Irish Small and Medium Enterprises association called for the Government to reduce State controlled costs, and called for a review of such charges.
"The State continues to levy excessive charges on the business sector, which is only increasing company closures and job losses," said chief executive Mark Fielding. "Cost competitiveness, particularly in the current environment, is of the utmost importance to SMEs. The fact remains that the Government is doing nothing to alleviate the high cost environment for business and are missing an opportunity to regain lost competitiveness."
