In November 2016, headline inflation stood at 1.8% m-o-m. It moderated to 12.1% in annual terms, according to data released by the State Statistics Service of Ukraine (SSU).
The annual inflation reading was anticipated and in line with the NBU’s inflation forecast published in the Inflation Report (October 2016) that projects annual CPI growth of 12% in 2016.
The slowdown in annual inflation (down from 12.4% in October) was due to a sharp decline in raw food inflation, which was deeper than previously expected. In the meantime, increases in administered prices were slightly higher than projected. Core inflation also increased at a faster-than-expected pace, outperforming the NBU's inflation projections.
- In November, core inflation moderated to 6.2% y-o-y. In monthly terms, core inflation stood at 0.5%. Heightened exchange rate volatility observed in the FX market in mid-November had a limited impact on inflation. Although, prices for select imported goods recorded a m-o-m increase, in annual terms price growth slowed. Thus, prices for clothes, footware, audio, photographic and information processing equipment, pharmaceutical products and vehicles grew at a slower pace. In November, core inflation growth was also held back by slower growth in prices for market services. In the meantime, prices for highly processed foods (hard cheeses, buns, and cakes) rose sharply, driven by higher milk and sugar prices.
- Raw food price increases slowed to 1.4% y-o-y (to 1.1% m-o-m), driven by supply side factors. In particular, a deeper decline in prices for select vegetables and fruits was mainly attributed to a higher supply of domestically produced and imported vegetables and fruits. Thus, restrictions on imports of fruits from Egypt imposed by the Russian Federation led to a decline in prices for citrus fruits. Slower growth in prices for meet and meat products was attributed to restrictions on exports of pork due to an outbreak of African swine flu (ASF). At the same time, prices for milk and dairy products continued to accelerate, driven by stronger demand from producers on account of higher exports of dairy products.
- The increase in administered prices and tariffs accelerated to 32.8% y-o-y (to 4.0% m-o-m), driven by higher utility prices, in particular tariffs for heating, water supply and sewage tariffs. The growth in prices for tobacco products and alcoholic beverages also continued to accelerate.
- The growth in fuel prices accelerated to 18.1% y-o-y (in monthly terms, fuel prices rose by 1.8%), driven by an increase in global oil prices in October.
Current CPI and its components’ developments suggest that actual headline will be close to the 2016 year-end inflation target of 12% y-o-y +/-3 pp.