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NBU October 2023 Inflation Update

NBU October 2023 Inflation Update

In October 2023, consumer inflation continued to slow in annual terms, to 5.3% yoy (down from 7.1% yoy in September). In monthly terms, prices increased by 0.8%. This is according to data published by the State Statistics Service of Ukraine.

The actual rates of price growth followed the trajectory of the NBU’s forecast published in the October 2023 Inflation Report. Core inflation, however, slowed somewhat faster than expected, primarily due to clothing and footwear prices. 

Raw food prices declined (by 3.3% yoy)

The decline in fruit prices continued, driven primarily by price decreases for citrus fruits and the slowdown in the growth of prices for exotic fruits. Vegetable prices continued to fall at a significant pace. This was primarily due to a good harvest of most vegetables thanks to both favorable weather and the ramping up of production volumes in some regions. Cereal and flour prices continued to decline, reflecting low export prices and increased production. Egg prices fell in annual terms as a result of the return to previous production volumes and because of the base effect. However, the drop in egg prices was restrained by the increase in their exports. The growth in pork prices decelerated, weighed down by the expansion of supply compared to last year’s levels and by its excess over demand. 

The increase in administered prices slowed to 11.1% yoy

The growth in prices for alcoholic beverages decelerated again, on the back of a slower increase in production costs amid pressure from the shadow market supply. The moratorium on raising some utility prices for households continued to restrain administered inflation. At the same time, the growth in prices for transportation services accelerated somewhat as fuel prices resumed their upward trend.

Fuel price growth accelerated to 9.7% yoy 

Fuel prices rose at a higher rate in October amid a rise in global oil prices in previous months and supply chain disruptions when crossing the border.

Core inflation decreased to 6.8% yoy in October, down from 8.4% yoy in September

The growth in prices for processed foods continued to decelerate (to 8.5% yoy). Such dynamics are attributable to the further easing of pressure from business costs, primarily the cost of raw food inputs, the sustainable situation in the FX market, and the optimization of production and supply chains. A decrease in the exports of sunflower oil and certain dairy and meat products, primarily butter and chicken, led to a slowdown in the growth of prices for meat, dairy, and edible oil products. Prices increased more slowly for bread and flour products and food products with a large share of imports in their production costs. 

The growth in nonfood prices also decelerated (to 1.7%) thanks to exchange rate sustainability. Specifically, the year-on-year drop in prices for electronic devices, household appliances, and clothing and footwear continued to deepen. In addition, prices for personal care products, medications, furniture, household goods, motor vehicles, and other products rose at a slower pace.

The growth in services prices decelerated again (to 11.7% yoy). Cafe and restaurant services grew in price more slowly as pressure eased off from the cost of raw materials that go into the production of food. Price increases decelerated for healthcare, veterinary, financial services, the internet, and beauty salon services. As expected, the price of hotel services grew at a slower pace as the effect of record-high temperatures faded. On the other hand, housing rents increased, probably due to migration processes, and the cost of repair services grew more expensive, especially amid a shortage of qualified personnel.

Inflation continued to decelerate, slowed primarily by the further expansion of the supply of food products and by the preservation of a sustainable situation in the FX market. To keep inflation moderate, the NBU will continue to ensure that hryvnia assets are sufficiently attractive and maintain its active presence in the FX market.

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