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Families benefiting from low inflation


Optimistic: Angela McGowan

Optimistic: Angela McGowan

Optimistic: Angela McGowan

Northern Ireland's poorest households are benefiting from the lowest inflation for five years thanks to a decline in energy and food prices, economists have said.

The Consumer Price Index measure of inflation dropped from 1.5% in August to 1.2% in September – its lowest dip since 2009 when it hit 1.1%.

Reductions in transport costs and recreational goods are among the headline features that have contributed to the slowdown.

Danske Bank's chief economist Angela McGowan said that the news eased the pressures being endured by households living on the tightest budgets.

"Households in Northern Ireland pay a larger proportion of their household income on food and energy, so the local economy will most definitely appreciate this latest decline," she added.

"Commodity prices – energy and food – have dropped in international markets, and these lower prices have combined with the strong pound to drag down the headline rate of inflation."

But not everyone will be toasting the low rate.

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"Falling inflation can act as a stimulus to economic growth as households enjoy the boost to their spending power," Angela said. "But for central banks, very low inflation can prove to be a big headache as it makes monetary policy ineffective."

Dr Esmond Birnie, PwC chief economist in Northern Ireland, agreed that September's monthly inflation figure represented "good economic news".

"The reduction has been attributed to falls in food prices thanks to intense price competition among the supermarkets, but more favourable prices for air fares also contributed to the decline," he said.

"With the UK economy now the fastest-growing in the developed world, we would expect to see inflation creeping up, prompting a rise in interest rates – so low inflation combined with real growth is a welcome package."

He also claimed the data made an early increase in the Bank of England's interest rate less likely. "And that will be good news for Northern Ireland's borrowers and mortgage holders," Mr Birnie said.