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NBU January 2024 Inflation Update

NBU January 2024 Inflation Update

In January 2024, consumer inflation declined in annual terms to 4.7% (down from 5.1% in December). In monthly terms, prices grew by 0.4%. This is according to data published by the State Statistics Service of Ukraine.

The actual rates of price growth were below the trajectory of the NBU’s forecast published in the January 2024 Inflation Report. Food prices rose more slowly than expected. Prices for fuel, transportation, and tobacco products grew at a slower pace as well. Underlying inflationary pressures, as reflected in core inflation, also eased in January, although less notably than the NBU had expected.

Core inflation declined to 4.6% yoy

The growth in prices for processed foods continued to decelerate (to 5.5% yoy). This was due to the continued effects of good harvests, in particular, a lower pressure from businesses’ costs on raw inputs for food products and feed.

Price increases slowed for bread, flour, confectionery products, and meat products. The fall in sunflower oil prices deepened, and prices for oil-based products grew more slowly. At the same time, the price growth accelerated for fish and dairy products. The latter may be the result of the border blockade, which has led to a decrease in supply of imported products, additional logistics costs, and shorter sales periods for these goods.

Non-food prices declined slightly (by 0.2% yoy), primarily due to a deeper decline in prices for clothing and footwear. At the same time, prices for other non-food items, such as electronics and household appliances, decreased slower compared to December.

Growth in services prices slowed to 10.1% yoy in January. Cafe and restaurant services grew in price more slowly as pressure from the cost of raw inputs used in the production of foods eased off.. The prices of healthcare, veterinary, financial, and insurance services grew at a slower pace, as did prices for car maintenance, cinema tickets, and dry cleaner services. In contrast, some housing maintenance services and personal care services grew more expensive at a quicker clip, due to both higher demand and a shortage of qualified personnel.

The growth in raw food prices decelerated slightly, to 2.1% yoy

Milk price growth slowed amid a decline in exports and a corresponding increase in volumes of raw milk on the domestic market. The price of eggs declined significantly year-on-year thanks to increased production and producers' reorientation to the domestic market. Cereal and flour prices continued to decline, reflecting low export prices and higher outputs. The decline in sugar prices deepened due to a record-high harvest of sugar beets. In contrast, the prices of borshch vegetables rose sharply amid a decrease in supply of high-quality products. Tomato prices grew faster due to the arrival of more expensive greenhouse produce onto the market, as did apple prices due to limited domestic supply. The decline in citrus prices also slowed.

The growth in administered prices slowed, to 10.4% yoy

The prices of alcoholic beverages and tobacco products continued to rise more slowly due to lower pressure from production costs and strong pressure from illegal products.  

The moratorium on raising utility prices for households continued to restrain the increase in administered prices. At the same time, price growth accelerated for some medicines amid higher import prices and increased demand due to a seasonal rise in flu and acute respiratory infections.

Fuel prices did not exceed last year’s levels (-0.1% yoy)

Fuel prices were almost at the level of January last year. This was primarily due to lower global crude oil prices and the diversification of fuel supply routes. 

In January, inflation decelerated faster than forecast. Such dynamics were driven by an increase in supply of certain food products, second-round effects from strong harvests, a decline in global crude oil prices, and the continued moratorium on increases in utility tariffs. At the same time, the favorable effects of temporary factors that eased inflationary pressures are gradually tapering off, while the risks of a rise in inflationary pressures remain, primarily due to the impact of the war. The NBU will keep pursuing the policy aimed at maintaining moderate inflation, in particular by ensuring that hryvnia assets are sufficiently attractive.

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