In June 2024, consumer inflation in annual terms (r/a) accelerated to 4.8% from 3.3% in May. On a monthly basis, prices increased by 2.2%. This is evidenced by data from the State Statistics Service. The National Bank commented on the rise in prices.
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“The actual rate of price growth was close to the National Bank’s target of 5% and turned out to be only slightly lower than the forecast published in the Inflation Report for April 2024,” the regulator said in a statement.
There is still a deviation from the forecast , first of all, due to the dynamics of prices for raw food products in April-May, the fall of which in annual terms turned out to be more significant than expected.
This reflects the impact of strong harvests last year and warm weather earlier this year. Fuel prices also rose somewhat more slowly due to lower oil prices than expected.
Fundamental inflationary pressure remained persistent. Core inflation rose to 5% in June from 4.4% in May. This dynamics corresponded to the April forecast of the NBU.
On the one hand, it was supported by a further increase in business expenses on wages and electricity, and a certain deterioration in inflation expectations, in particular due to the weakening of the hryvnia exchange rate. In addition, secondary effects from the reduction in prices of raw food products were limiting factors.
The decline in prices for raw food products slowed down somewhat – to 6.5% p/c
In particular, they rapidly decreased The pace of decline in prices for eggs is likely due to a reduction in production and rising production costs for electricity in hot weather.
The decline in prices for sugar has slowed down somewhat amid the expansion of the geography of its exports. The fall in prices for flour and cereals also slowed down.
Prices for tomatoes and cucumbers fell more and more slowly. Some borscht vegetables and apples fell in price due to hot weather and increased sales of products from storage facilities amid rising storage costs, in particular due to power outages.
Thanks to the further recovery of livestock farming, the rise in meat prices further slowed down, and pork prices fell significantly. The rise in prices for milk has also slowed down somewhat. Due to the limited supply of quality products, the cost of potatoes, beets and some fruits remained high.
The growth of administratively regulated prices accelerated significantly – to 13.3% y/y
The revision of electricity tariffs for the population had a significant pro-inflationary impact and led to the acceleration of administrative inflation. Additional pressure on prices was exerted by the rise in prices for electricity for non-domestic consumers, which is reflected in consumer prices due to the secondary effect, primarily the increase in production costs.
Tobacco products were also rising in price faster, probably against the backdrop of strengthening measures to combat shady products. The growth in prices for pharmaceutical products, medical goods and equipment accelerated, probably due to the exchange rate factor.
At the same time, administrative inflation was further restrained by a moratorium on increasing tariffs for housing and communal services for the population.< /p>
Fuel price growth accelerated to 25.5% y/y
The NBU noted that such dynamics reflected the rise in oil prices on world markets, the weakening of the hryvnia exchange rate and the intensification of fuel purchases ahead of the expected increase in the excise tax.
Core inflation accelerated to 5.0% y/y
The growth rate of prices for processed food products increased to 5.9% y/y. Thus, prices for cheeses and butter rose more rapidly, taking into account the increased export of dairy products, as well as the increase in prices for raw materials in previous months and production costs.
Price increases for bread and certain flour products accelerated due to high production costs for labor and energy, as well as insufficient supply of flour. Certain imported goods, including chocolate and coffee, rose in price faster.
The fall in prices for sunflower oil slowed down under the influence of price trends on world markets, and prices for oilseed products, in particular margarine, accelerated their growth. At the same time, the rise in prices for meat products slowed down due to secondary effects from further recovery in livestock production.
Prices for non-food products resumed their growth (by 0.4% y/y), primarily under the influence of the exchange rate factor. In particular, prices for clothing and footwear fell more slowly, while the rise in prices for other non-food products accelerated.
Services also rose in price faster – by 9.9% y/y, probably under pressure from business costs for labor and energy. In particular, prices for healthcare and transport services, the cost of operating your own vehicles and insurance increased faster.
The growth in the cost of services in hotels, cafes and restaurants slowed down, primarily due to reduced pressure from the cost of food raw materials, as well as services for personal care and financial services.
What will happen next
The NBU noted that price pressure will continue in the coming months, primarily due to increased business costs, in particular on wages and electricity, as well as the exhaustion of the effects of last year’s significant harvests and the expected increase in excise taxes.
- NBU