In seasonally adjusted terms, the consumer price index (CPI) declined by 0.3% in June (With the seasonal factor excluded, the CPI increased by 0.1%). The sharp fall in annual CPI inflation (from 0.5% in May to -1.2% in June) was attributed to the high comparison basis as the CPI inflation rose by 0.4% in June 2011. However, annual CPI inflation is expected to increase over the coming months against the backdrop of a low comparison basis of the previous year (In July 2011, the CPI decreased by 1.3%).

In month-on-month terms, a 0.6% decline in the non-core CPI was mainly driven by a large supply of foodstuffs. In June, annual non-core CPI fell by 7.1%. The non-core component was a key factor behind the decline in the CPI, contributing “minus” 3.2 p. p. to the annual change in the CPI.

The good vegetable harvest helped push vegetable prices down (by 2.9% month on month and by 60.1% year on year). As a result, prices for raw foods dropped by 1.1% month on month (by 11.8% year on year). In June, administratively-regulated prices rose by 0.3% (in year-on-year terms, their change stood at “minus” 0.1%) due to price increases for excisable goods and transport services. Fuel prices fell by 2.5%, which was driven by a fall in the world oil prices (in year-on-year terms, fuel prices grew at an annual rate of 6.2%).

The core CPI rose by 0.1% on the month, with its annual growth rate decelerating to 3.7% (contribution to the CPI made up 2.0 p. p.). The decline in annual core CPI was attributed to the moderate monetary policy pursued by the National Bank of Ukraine, which continues to restrain inflationary pressure generated by demand, and the strengthening of the real effective exchange rate (REER) of hryvnia. The latter caused the narrow core CPI to decline by 0.1% month on month. In year year-on-year terms, the narrow core CPI slowed down to 0.6%.

  In June 2012, the producer price index (hereinafter - the PPI) grew by 0.7%, with its annual growth rate standing at 4.5% (compared with 4.3% recorded in May). The PPI growth was driven by a 6.4% rise in prices for production and distribution of electric power, gas, and water (contribution to the PPI made up 1.2 p. p.). Prices for mining industry products and processing industry products have dropped by 1.9% and 0.9% respectively.