In January 2016, headline inflation stood at 0.9% m-o-m. In annual terms, headline inflation moderated to 40.3%, down from 43.3% in December.
The inflation figures published by the State Statistics Service of Ukraine were nearly in line with NBU projections (that headline inflation would amount to 1.1% m-o-m in January). January's inflation developments suggest that inflation was on a downward trend in line with NBU projections, according to which headline inflation is expected to moderate to 12% by the end of 2016.
The largest deviation from the estimated trend was recorded by core inflation. Core inflation differs from headline inflation in that it is calculated by excluding prices for goods and services that are subject to fluctuations driven by factors that are beyond the control of monetary policy. These include certain raw food prices (including vegetables, fruits, and eggs), as well as for fuel and administered prices.
Core inflation remained flat m-o-m in January, coming below NBU projections of a 0.7% increase.
The deviation from NBU projections can be attributed to a deeper-than-expected decline in prices for clothes and footwear (by 4.4% m-o-m), which offset an expected moderate increase in prices for other components of core inflation, including the prices of goods that are mostly imported, such as household appliances, pharmaceuticals, photographic equipment, and data processing equipment. The prices for these goods rose amid increased fluctuations in the hryvnia exchange rate. As a result, core inflation moderated to 31.3% y-o-y, outperforming the current projections.
The non-core CPI increased by 1.8% m-o-m, which was generally in line with NBU projections.
The increase in the non-core CPI was driven by a rise in raw food prices (by 3.5% m-o-m). As expected, prices for milk and dairy products kept rising due to a decline in cattle stock and stronger demand amid growing export opportunities. There was a seasonal increase in prices for eggs and vegetables. The prices for imported fruit and vegetables rose as projected, driven, among other factors, by depreciation of the exchange rate of the hryvnia.
As anticipated, domestic fuel prices dropped by 1.3% m-o-m, driven by a further decline in global oil prices and aided by regulatory measures put in place by the government.
Administered prices and tariffs broadly remained flat in January as projected (a m-o-m increase of 0.1% was recorded). In particular, the prices of tobacco kept declining (by 3.4% m-o-m) due to some producers decreasing their prices. The decline in the prices of tobacco was offset by an increase in administered prices and prices for other goods and services, such as alcoholic beverages and bread, as well as utility prices.