In May 2012, annual CPI inflation entered negative territory for the first time since 2002, standing at -0.5%. On a month-to-month basis, CPI inflation declined by 0.3%. The seasonally adjusted CPI figure was positive, standing at 0.1% in May.

The core CPI continued to decline further (to 4.2% as of the end of May). The moderate monetary policy pursued by the National Bank of Ukraine contributed to restraining inflationary pressure generated by demand.

Price increases for deeply processed foodstuffs, being the core CPI component, decelerated to 11.1% over the year, which was driven by secondary effects arising from a drop in prices for raw foods. The narrow core CPI remained unchanged in May. However, the narrow core CPI declined to 0.9% year on year.

The non-core CPI has been on a downward trend since the middle of 2011. The non-core CPI dropped by 4.2% year on year and by 0.7% on the month, contributing “minus” 0.4 p.p. to the change in the CPI. The trend was driven by an ongoing decline in prices for raw foods, which fell by 11.1% year on year on account of last year’s good harvest.

Increases in administratively-regulated prices slowed down to 0.5% (in May prices grew by 0.2%), contributing 0.1 p. p. to the annual change in the CPI (0.0 p. p. on the month).

Fuel price increases decelerated further to 10.0% year on year (as of the end of May), contributing 0.2 p. p. to the change in the CPI against a backdrop of a high comparison basis.

In May 2012, the producer price index growth (hereinafter - the PPI) continued to decelerate  further to 4.3% year on year, which was associated with the fall in global demand and prices in the global commodity markets. Prices for foodstuffs, beverages and tobacco goods, which picked up by 5.9%, were the major contributors to the annual change in the PPI (0.9 p. p.). The PPI grew by 0.2%, compared with the previous month, contributing 0.2 p.p. to the change in the PPI. The PPI growth was mainly driven by price increases recorded in the chemical industry (by 4.5%).