Inflation rose by 2.6 per cent in the year to September, new data showed today, while prices were up 0.3 per cent in the month, according to new figures from the Central Statistics Office (CSO).

The latest data show the annual rate of inflation rose from 2.2 per cent in August to 2.6 per cent in September.

Consumer prices rose by 0.3 per cent last month, compared to a decrease of 0.1 per cent for September 2010.

The Consumer Price Index (CPI), excluding energy products, was up by 0.3 per cent in the month and increased by 1.6 per cent in the year. When mortgage interest repayments are excluded, the CPI increased 0.1 per cent in the month and by 1.6 per cent in the year.

The EU Harmonised Index of Consumer Prices (HICP) increased by 0.1 per cent in the month, as against a 0.2 per cent decrease in September of last year. The annual rate of inflation, as measured by the HICP, was 1.3 per cent higher in September compared with September 2010.

The most notable monthly price changes were in clothing and footwear, which was up 5.4 per cent while the category of costs including housing, water, electricity, gas and other fuels rose 1.7 per cent, mainly due to higher mortgage repayments.

Transport costs fell 0.7 per cent from August to September, primarily because of cheaper airfares. The annual rate of inflation for services was 3.6 per cent in the year to September, while goods increased by 1.3 per cent.

According to the CSO data, the most notable annual changes were in housing, electricity, gas and other fuels, which were up 8.9 per cent. Miscellaneous goods and services prices were up 6.5 per cent while transpirt and health costs were up by 4.2 per cent 3.4 per cent respectively.

Over the year to the end of September 2011, there was a 2.3 per cent decline in prices for furnishings, household equipment and routine household maintenance. There was also a 1.6 per cent fall in the education costs.

Chief economist with Bloxham Stockbrokers, Alan McQuaid, said with employment growth not expected until well into next year and further cuts expected in the budget, domestic inflationary pressures are likely to remain subdued for some time.

"Continued weak consumer demand and one-off factors such as the reduction in VAT for mainly tourism related services should help to push inflation down over the remainder of the year, as should the general slowdown in the world economy. In addition, weaker sterling vis-à-vis the euro may also give rise to lower import prices, mainly for food, clothing and footwear," he said.

However, significantly higher energy prices relative to the second half of 2010 will likely exert upward pressure on the headline annual inflation rate," he added.

Isme expressed concerns at the rise in inflation, saying it was putting further pressure on companies.

"If the Government is serious about promoting an export led recovery why are they consistently undermining this objective by allowing incessant cost increases to business," asked Isme's chief executive Mark Fielding.

"When we are supposed to be improving our competitiveness, the authorities continue to weaken the position of business by allowing significant increases in state influenced services.

"This policy continues unabated, making no sense whatsoever. These price increases are detrimental to the business community and invariably filter through to overall higher costs in the economy and in turn to consumer prices," he added.

The Small Firms Association also expressed concern about rising prices and called on the Government to take immediate action to ensure that the main domestic drivers of the inflation rate are brought under control.

"The Government must now do its part and set out how it will urgently tackling the issue of costs. If action is not taken further jobs will be lost and businesses will close," said the organisation's assistant director Avine McNally.