Fruits and vegetables were around 10 percent cheaper than a year ago in May and food prices were down 1 percent. This is because cheapening prices on foreign markets started affecting Estonian prices, said Kristjan Pungas, fiscal policy analyst at the Finance Ministry.
In particular, the supply of milk is outstripping demand and produce is down in price due to good weather conditions.
Imports - which make up a signficant part of the sample food basket - started dropping in price last year and the trend has continued. Prices of services, driven by higher wages, have undercut some of the external drop in price.
In terms of month-to-month trends in May, heating and communication services dropped in price and electricity rose slightly, although power is still cheaper for home consumers than it was a year ago.
Annual inflation will remain low through the summer, said Pungas, but will start increasing gradually in the fall, driven by a rise in the price of services. One reason, he said, is that there will be more young people entering the job market due to higher education reform, and this will put pressure on companies to increase prices.