The National Bank commented on the growth rate of inflation in Ukraine
The reason for the deviation from the previous forecast is a number of factors, including the cost of products.
In June 2024, annual (y/y) consumer inflation accelerated to 4.8% from 3.3% in May, and monthly prices increased by 2.2%. About this comments National Bank of Ukraine (NBU).
What the data of the NBU show
The National Bank noted that the actual rates of price growth were close to the target of 5% and turned out to be slightly lower than the forecast published in the Inflation Report for April 2024. The deviation from the forecast was due to the dynamics of prices for raw food products in April-May, where the fall in annual terms turned out to be more significant than expected.
This was the result of strong harvests last year and warm weather earlier this year. Fuel prices also rose more slowly due to the lower-than-expected oil price.
The main factors of inflation
Fundamental inflationary pressure remained stable, the growth of core inflation in June to 5.0% from 4.4% in May corresponded to the NBU’s April forecast. Further growth in business costs for labor and electricity, deterioration of inflationary expectations due to the weakening of the hryvnia exchange rate, as well as secondary effects from the cheapening of raw food products affected inflation.
Dynamics of prices for individual goods
The decline in raw food prices slowed to 6.5% y/y, in particular due to reduced production and rising production costs for electricity in hot weather conditions. The fall in sugar prices slowed down against the background of the expansion of the export geography, and the prices of tomatoes, cucumbers and other borscht vegetables decreased due to hot weather and increased sales of products from storage.
The growth of meat prices slowed down thanks to the recovery of animal husbandry, and pork became significantly cheaper. Milk price growth also slowed, but the cost of potatoes, beets and some fruits remained high due to limited supply of quality products.
Administratively regulated prices
The growth of administratively regulated prices accelerated to 13.3% y/y due to the revision of electricity tariffs for the population, which caused a pro-inflationary effect. The increase in electricity prices for non-household consumers was also reflected in consumer prices due to an increase in the cost of production. Tobacco products became more expensive due to the strengthening of measures to combat shadow products, and the prices of pharmaceutical products also increased due to the exchange rate factor.
Fuel and other products
Fuel prices increased by 25.5% y/y due to the increase in oil prices on world markets, the weakening of the hryvnia exchange rate, and the intensification of purchases ahead of the expected increase in the excise tax. Core inflation accelerated to 5.0% y/y, and the growth rate of processed food prices increased to 5.9% y/y. The increase in prices for bread and certain flour products accelerated due to high production costs.
Prospects
The National Bank of Ukraine noted that price pressure will persist in the coming months due to increased business costs for labor and electricity, the exhaustion of the effects of last year’s harvests, and the expected increase in excise taxes.
