LISBON Portuguese consumer prices rose 4.0% year-on-year in May in a significant slowdown from a 5.7% increase the previous month, also slipping slightly on a monthly basis, flash data released by the National Statistics Institute (INE) showed on Wednesday.

Core inflation, which strips out volatile food and energy prices, clocked 5.5% year-on-year, down from a reading of 6.6% in April.

The decline in the main inflation rate was driven by a 15.5% slump in energy prices from a year ago, following 12.7% drop in April, while prices of unprocessed food products rose 8.9%, at a slower pace than April's 14.1%, helped by an exemption of essential food items from value-added tax.

The government has removed for six months the VAT on a list of more than 40 essential goods, including milk, bread, rice, tomatoes, and some types of meat and fish.

On a monthly basis, consumer prices slipped 0.7%.

Inflation has been cooling off after peaking at 10.1% year-on year in October, the fastest pace of consumer price rises in more than three decades.

(Reporting by Patricia Vicente Rua and Gdansk Newsroom; Editing by Andrei Khalip)