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Sweden's food prices buck downward trend

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11:19 CEST+02:00
Consumer prices have dropped in Sweden over the last twelve months, according to new figures from Statistics Sweden.

Prices fell by 0.4 percent in May on a 12-month basis, after a drop of 0.1 percent in April, the agency said in a statement on Thursday.

Food prices however were 2.9 percent higher than the same period last year, a development explained largely by the weak krona, according to SEB bank.

The food price rise was led by the high cost of bread and other grain products (up 2.8 percent), meat (up 3 percent) and fruit (up 6.2 percent).

"We import around half of what we eat, so the krona effect becomes very clear," the bank's chief analyst, Henrik Mittelman told news agency TT.

But in general prices were down. Lower interest rates and a fall in the cost of home repairs were the key drivers behind the deflation, the Statistics Sweden statement said.

From April to May, however, consumer prices rose by 0.1 percent owing to the increase in petrol prices, according to Statistics Sweden.

Sweden experienced several months of strong inflation last year before tailing off rapidly.

In September, inflation was as high as 4.4 percent year-on-year.

Sweden's central bank has set itself an inflation target of 2.0 percent year-on-year.

Deflation can hamper economic growth because it reduces businesses profits and discourages investment.

It also leads consumers to put off buying goods in the hope that prices will continue to fall.

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