In 2011, consumer price inflation decreased to 4.6% (the lowest figure recorded in the last nine years), being below the official Government’s forecast and expert estimates on account of a bumper crop and curbing administratively regulated prices for commodities and services.
The average annual inflation rate slowed down from 9.4% in 2010 to 8% in 2011.
In December 2011, the consumer price index (hereinafter – the CPI) grew by 0.2%, reaching record lows for this month in statistical reviews. In December, for the fourth successive month, the seasonally adjusted CPI remained negative (-0.3%).
The demand had a moderate impact on the CPI. The core CPI declined from 7.9% in 2010 to 6.9% (it stood at 0.2% in December), whereas its contribution to the annual change in the CPI decreased from 4.3 p. p. to 3.8 p. p., which resulted from a tight monetary and fiscal policy against a backdrop of secondary effects of a fall in prices for raw foods and a negative GDP gap.
Owing to a constraining effect of strengthening of the nominal effective exchange rate of hryvnia (by 6.8% in 2011) in the context of higher rates of inflation in Ukraine’s main trading partners, the annual growth of the narrow core CPI slowed down to 2.6%.
A bumper crop caused a drastic fall in prices for raw foods (by 4% over a year, contribution to the annual change in the CPI made up “minus” 1.1 p. p.) and brought about a decline in the non-core CPI, which decreased to 1.7% on a year-on-year basis (a month-on-month change stood at 0.2%).
A drop in prices for sugar (-20.5% over a year) and liquefied gas (-6.8%) in the second half of 2011 entailed a reduction of contribution to the CPI made by administratively regulated prices for commodities and services (contribution to the CPI made up 1.4 p. p. in 2011). Price rises for other components of this group (utility prices) resulted in a positive contribution to the CPI.
Revival of economic activity and increased investment demand (in the first three quarters of 2011) entailed a significant rise in the producer price index (hereinafter - the PPI). However, an upward trend turned downward in the fourth quarter. As a result, the PPI climbed by 14.2% in 2011.