Consumer prices in Portugal increased 4.0% year-on-year in May in a considerable slowdown from a 5.7% rise in April, according to flash data published by the National Statistics Institute (INE).

Core inflation – excluding volatile energy and food prices – stood at 5.5% year-on-year, down from 6.6% in April.

The fall in the main inflation rate was fuelled by a 15.5% slump in energy prices compared to last year, following a 12.7% decline in April. Whereas prices of unprocessed food products edged up 8.9%, a slowdown from 14.1% in April, bolstered by a VAT exemption on essential food items.

For six months, the government has removed VAT on more than 40 essential goods, Reuters news agency reports.

Furthermore, on a monthly basis, consumer prices declined by 0.7%.

Since reaching a peak of 10.1% year-on-year in October – the fastest pace of consumer price hikes in over 30 years - inflation has been cooling down.

GDP in Q1 rose by 2.5% year-on-year and 1.6% quarter-on-quarter, and Portugal’s finance minister Fernando Medina said that this figure stands as “confirmation of the growth of the Portuguese economy essentially driven by exports. Exports of services, especially tourism, but also exports of goods, that is, Portuguese industry showing a very significant capacity to advance in relation to its export markets and, with this, contributing to the increase of wealth in our country.”

In reference to the fall in inflation in May, the finance minister added: “Inflation has already been falling for several months (…) This reinforces our expectation that we will soon have months with inflation below 3%” and “it is very important for families, as it tends to stabilise their prospects regarding purchasing power and the decisions they have to take.”

He went on to say: “What this data indicates is that we are on our way to a situation that is much more stabilised, much more predictable and much less turbulent, from the point of view of price evolution, than the one we experienced over the last year and that is of the utmost importance. The outlook that we had of having several months throughout this year with inflation below 3% becomes more solid today.”