Prices rose marginally in August as the cost of drinks, education and restaurants climbed higher.

The Central Statistics Office said the annual inflation rate was 0.2 per cent last month, its lowest rate in three years, with prices only 0.1 per cent higher month on month.

The main yearly changes were seen in the alcoholic beverages and tobacco sector, where costs were up 5.4 per cent. This was mainly due to higher prices for alcohol in off licences and supermarkets, and an increase in tobacco prices.

There was a 4.8 per cent rise in the cost of education, and a 1.6 per cent increase in costs for restaurants and hotels, which was again attributed to higher alcohol prices. However, prices in accommodation services, including hotel bednights, fell by 0.8 per cent over the year to August. The Irish Hotels Federation said the decline represented very competitive market conditions in the sector.

The broad rises were partly offset by decreases in clothing and footwear of 5.1 per cent, which was due to the summer sales, with household furnishings and equipment falling by 4 per cent. The cost of transport was also lower compared with a year earlier, falling by 3.3 per cent as airfare prices declined and the cost of petrol and diesel fell.

On a monthly basis, the main changes were seen in clothing and footwear, which rose by 4.2 per cent, while there was a marginal rise in the price of restaurants and hotels, of 0.2 per cent as the cost of hotel accommodation rose.

Food and non-alcoholic beverages fell by 0.6 per cent, a similar monthly decline to that of alcohol and tobacco.

The HICP rate, which is used for EU comparative purposes and excludes certain items, posted a monthly increase of 0.1 per cent in August, and remained static on an annual basis, the lowest year-on-year reading since December 2010.

“Domestic inflationary pressures in Ireland are likely to remain depressed for some time to come,” Merrion Stockbrokers’ Alan McQuaid wrote in a note. “Continued weak consumer demand will in general put downward pressure on prices in the months ahead. The austerity measures announced in Budget 2013, in particular the residential property tax, will again hit disposable incomes, which in turn will weigh negatively on spending power.”

He predicted inflation rates would remain subdued for the rest of the year.

“Taking all the factors into account, including base effects, which should push the headline inflation rate higher as the year goes on, it is still hard to see the average rate for 2013 as a whole coming in above 0.8 per cent as against 1.7 per cent and 2.6 per cent in 2012 and 2011 respectively.”

Business lobby groups continued to warn Government that it was State-influenced costs that were stifling economic growth.

ISME, the Irish Small and Medium Enterprises Association called on the Government to address these costs and prevent further inflation increases.