In July 2012, the consumer price index (hereinafter - the CPI) continued its downward trend, having declined by 0.2% on a month-on-month basis. With the seasonal factor excluded, however, the CPI rose by 0.8% in July, as compared with the previous month. Annual CPI inflation declined by 0.1%.

For the eleventh month in a row, annual core CPI inflation continued to decelerate (to 3.1% as of end of July), contributing 1.8 p. p. to the change in the CPI. On a month-on-month basis, the core CPI remained unchanged.

The decline in CPI inflation can be attributed to the coherent monetary policy pursued by the National Bank of Ukraine, which continues to restrain inflationary pressure generated by demand, and domestic consumer demand being lower than its potential (GDP gap stood at 1.7% in the second quarter). 

 A decline in prices for raw foods has put downward pressure on price rises for deeply processed foodstuffs. In annual terms, the narrow core CPI growth has slowed down to 0.4% owing to the strengthening of the nominal effective exchange rate of hryvnia.

The deceleration in inflation recorded in July was driven by a decline of 0.4% in the non-core component. In annual terms, the pace of decline in the non-core CPI slowed down significantly from 7.1% in June to 4.2% in July (-1.9 p. p. – contribution to the change in the CPI). The key factor behind this deceleration remains the movements in raw food prices, which fell by 7.2% year on year, mainly owing to a large supply of food stuffs. The administratively-regulated prices declined by 0.2% year on year (in July they rose by 0.4%). In annual terms, fuel price increases continued to slow down to 4.9% as of end of July, owing to a decline in world oil prices recorded in the second quarter of 2012. 

In July 2012, the producer price index (hereinafter - the PPI) fell by 2.9%. Annual PPI growth slowed down to 1.4% due to weak domestic and global demand. The largest positive contribution to the annual change in the PPI (2.7 p. p.) came from a 13.7%, rise in prices in the manufacturing and distribution of energy, gas and water. The negative contribution (-1.4 p. p.) came from a 6.7% drop in the prices for metallurgic industry output.