Cyprus recorded a rare instance of deflation in May 2025, marking the first time in over four years that consumer prices declined on an annual basis, according to figures released by the Statistical Service of Cyprus.
The annual inflation rate for May dipped to -0.2%, a reversal from recent inflationary trends. The last time the Consumer Price Index (CPI) showed a year-on-year decline was in March 2021, when inflation reached -0.72%.
Although the CPI saw a minor monthly increase—from 117.31 in April to 117.57 in May, a 0.26-point rise—the overall trend compared to May 2024 was downward, resulting in deflation.
Price Movements by Category
A breakdown of the data shows contrasting trends across sectors. On an annual basis, Agricultural Products rose by 4.7% and Services increased by 3.5%. However, these were outweighed by sharp declines in Petroleum Products (-12.8%) and Electricity (-8.6%), which significantly influenced the overall negative inflation rate.
Other sectors contributing to the downward trend included Transport, which fell by 6.6%, and Clothing and Footwear, down 5.3%. On the contrary, notable annual increases were observed in Restaurants and Hotels (+4.9%), Recreation and Culture (+4.0%), and Education (+3.7%).
From a month-to-month perspective, the most significant gain was seen in Clothing and Footwear, which rose 2.4% in May compared to April. Conversely, the Transport category registered the sharpest monthly drop at 2.4%.
Key Drivers of Deflation
The most substantial downward pressures on the annual inflation rate came from Petroleum Products and Transport, which contributed -1.47 and -1.21 units to the CPI respectively. Meanwhile, upward contributions were made by Restaurants and Hotels (+0.52 units) and Food and Non-Alcoholic Beverages (+0.46 units).
The decline in energy-related costs appears to be the principal driver behind the overall deflation, highlighting the ongoing volatility in global energy markets and its effects on domestic pricing.
Source: Stockwatch.com.cy