In June 2020, consumer inflation accelerated to 2.4% yoy, up from 1.7% in May, while in monthly terms prices grew by 0.2%, according to data compiled by the State Statistics Service of Ukraine.
Although accelerating, consumer inflation was below the 5% ± 1 pp target range and remained lower than forecast in the April 2020 Inflation Report. Price growth was restrained by weak domestic demand, benign FX market conditions, and relatively cheap energy. Meanwhile, raw foods increased in price due to unfavorable weather.
- At 3.0% yoy, core inflation did not change from May. Underlying inflationary pressures were mitigated by subdued domestic demand and a stable FX market.
Prices for nonfood products fell at practically the same rate as in May (1.3% yoy). Specifically, the fall in prices for electronic devices, toys, and travel goods deepened. Prices for cars, home appliances, clothing and footwear also remained lower than last year. The growth in prices for pharmaceuticals and personal care products decelerated.
The growth in the prices of processed foods also remained practically unchanged, at 3.7% yoy. Price increases for meat products and some dairy and bakery goods were held back by continued weak demand and a recovery in supplies after transport restrictions were lifted. Sluggish demand and the stable FX market situation also held back rises in prices for nonessential goods, while prices for certain products – such as coffee and olive oil – were even lower than last year.
Services prices also showed stable dynamics (up 8.4% yoy). On the one hand, prices for medical and personal care services grew faster, driven by both stronger demand as the incidence of disease increased, and due to higher production costs. The growth in prices for mobile communications also accelerated. On the other hand, the growth in prices for insurance services, housing rentals, financial services, notary services, and catering services decelerated as demand waned. Prices of the services of sectors that remained under lockdown in May (recreation, sports, education) continued to stand at March levels.
- The growth in raw food prices accelerated significantly (to 5.0% yoy). Beef and eggs increased in price at a faster pace. In addition, the rate of decline in poultry and vegetable prices decreased as comparison base effects faded and the weather worsened. The heat wave and shrinking supply also affected fruit prices, particularly those of strawberries, prices for which continued to grow rapidly.
- The growth in administered prices slowed, to 3.2% yoy. Natural gas prices for households continued to decline after the plunge in global and domestic natural gas prices was factored into the new tariffs. Prices for alcoholic beverages and tobacco products rose more modestly. The increase in passenger fares for rail and road transport slowed because of falls in fuel prices in previous periods.
- The drop in fuel prices decelerated somewhat (to 26.5% yoy), primarily reflecting the recovery in global oil prices in recent months, as well as strong demand for fuel as a result of the use of personal transport intensifying, even after restrictions on public transit were relaxed.
These drivers of inflation will be taken into account as the NBU revises its macroeconomic forecast, the gist of which will be presented at the NBU Board’s 23 July 2020 press briefing on monetary policy. Full details of the forecast will be published in the Inflation Report scheduled for release on 30 July 2020.