The rate of inflation fell to 2.2 percent in May, the lowest rate reported all year, according to Government statistics released yesterday.

The combined price of various goods and services increased 2.2 percent since May of last year, compared with a 2.4 percent increase between April 2001 and April 2002. Between April and May of this year, prices increased an average of 0.1 percent.

The Consumer Price Index (CPI), the basket of goods and services statisticians use to measure price changes, was partly driven higher by the cost of fuel and energy, which increased 17 percent and comprises 3.3 percent of the index. BELCO's fuel adjustment surcharge, which the electricity company levies to counter increases in world oil prices, rose 21 percent from 2.1393 cents per kilowatt hour in April to 2.5867 cents per kilowatt hour in May. That pushed up the overall cost of electricity, which rose 1.9 percent.

The price of food and beverage increased 0.2 percent in May, which included "notable" price movements for grocery items.

The price of tomatoes increased 5.6 percent, celery rose 4.7 percent and cheese rose 2.6 percent. Frozen lamb leg was 4 percent cheaper in May than in April, apples were 3.3 percent cheaper and local carrots were 3 percent cheaper. Rent - the biggest single component of the CPI, accounting for 27.6 percent of its value - increased 0.1 percent during the month, driven by a 0.2 percent increase in the cost of renting properties subject to rent control. The cost of renting other properties was stable.

Tobacco and liquor prices also rose 0.1 percent. The Department of Statistics said the increase was caused by higher beer prices, although spokesmen for Gosling Brothers and Burrows Lightbourn both said their companies had not changed the prices of their most popular brands. Clothing and footwear did not change between April and May. The price of large appliances like clothes washers and air conditioners declined.

Transport and vehicle costs fell 0.1 percent. Premium gasoline prices contracted 1.5 percent, or 2 cents per litre, although the cost of mixed gasoline jumped 30 cents during the month. The decline in this sector was also due to seasonally-discounted airfares.

The price of education, recreation and reading advanced 0.2 percent. Recreational fees increased 3.2 percent in May and the cost of feeding pets increased 0.4 percent. But those increases were muted by a 1.5-percent decline in premium boat fuel. Health and personal care costs fell 0.1 percent during the month, partly due to lower prices for items like toiletries, cosmetics and perfumes, which fell 0.1 percent. Bermuda's rate of inflation remains higher than figures reported in the United States, Canada or the United Kingdom, where year-over-year inflation rates in May were 1.2 percent, 1 percent and 1.1 percent, respectively.

Bermuda College economics professor Craig Simmons explained that Bermuda not only imports inflation from those countries by buying merchandise from their companies, but suffers from increases in the markups charged here and wage inflation. He said that wages had crept up because of excess demand for labour and increased the costs of goods and services locally.