CHEAPER MORTGAGES and winter sales have resulted in the annual rate of inflation declining for the second month in a row. It now stands at 2.2 per cent, according to the latest figures from the Central Statistics Office.

Compared with last year, the price of household furnishings was 1.9 per cent lower, while clothes and shoes declined by 1.1 per cent. The cost of recreation fell by 1 per cent.

These annual declines were offset by a 8.9 per cent rise in the cost of education compared to the same period last year, and a 6.7 per cent rise in housing and utility prices.

From month to month, the cost of clothes and shoes fell by 10.7 per cent last month, while the average cost of mortgage interest was down by 5.6 per cent following two interest rate cuts announced by the European Central Bank late last year.

Furniture and other household equipment was 2.5 per cent cheaper last month.

Alcohol and tobacco rose by 3.5 per cent last month as special offers in supermarkets and off-licences came to an end and tobacco prices increased.

Transport costs also rose during the month, with higher petrol and diesel costs leading to a 1.2 per cent rise overall.

Motor tax also increased last month, while public transport charges for consumers also went up

Retail Excellence Ireland said price falls could be explained by consumers shopping around and moving away from brands in many markets.

“In a nutshell, consumers are seeking out and responding to lower prices, and when value is discovered customers are willing to buy more, thus driving ‘items per sale’ rates and enhancing average transactional values,” said the lobby group’s chief executive, David Fitzsimons.

“The fall in inflation, despite the VAT rise in January, is a welcome development for households,” said Davy’s David McNamara.

“Continued declines in the index should ease pressure on households’ real incomes in 2012.”

Meanwhile, the EU Harmonised Index of Consumer Prices, which excludes items such as mortgage interest, fell by 0.4 per cent in the month, and rose by 1.3 per cent year on year.