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NBU September 2021 Inflation Update

NBU September 2021 Inflation Update

In September 2021, consumer inflation accelerated to 11% yoy (up from 10.2% in August). In monthly terms, prices grew by 1.2%. This is according to data published by the State Statistics Service of Ukraine.

The actual rate of consumer inflation came out lower than in the NBU’s forecast published in the July 2021 Inflation Report. This was primarily due to consumer inflation being lower in August and a stronger hryvnia. At the same time, this deviation from the forecast narrowed in September compared to August as prices for raw food and services increased sharply. 

Core inflation rose to 7.4% yoy in September (up from 7.2% yoy in August)

The growth in prices for processed foods accelerated further (to 13% yoy). In particular, prices for pasta, confectioneries, meat products, and dairy products increased faster due to higher costs of the raw materials, energy, and labor that go into the production of these goods, and sustained consumer demand. Products for which sunflower oil is a substantial input (spreads and mayonnaise) also became more expensive, reflecting the increase in sunflower oil price in previous periods. However, the price growth of the latter continued to slow. The rate of increase in prices for goods with a large share of imported inputs (tea, coffee, spices, and seafood) also declined.

The growth in services prices accelerated rapidly (to 9.1% yoy). Robust consumer demand and higher production costs also drove this increase. In particular, taxi rides, fast food restaurant meals, hotel rentals, personal transport insurance, educational and financial services, and household services (shoe repair, dry cleaning) all increased in price. In addition, the accelerated spread of COVID-19 made it more expensive to receive medical consultations and hospital services.

At the same time, the growth in nonfood products prices slowed further (to 1.4% yoy) as the hryvnia strengthened. Specifically, the pace of growth in pharmaceutical products prices decreased, while clothing, footwear, medical supplies, and cars continued to fall in price in annual terms. Meanwhile, the rise in the prices of electronic devices accelerated.

Raw food prices surged (by 14.2% yoy)

With feed and raw materials growing more costly, meat, flour, eggs, and milk became more expensive as well. On top of that, prices for eggs and milk reflected a cold spell in September, which also pushed vegetable prices up. Price increases in this group of goods were restrained by lower prices for sweet peppers, apples, and watermelons amid a better harvest this year.

The growth in administered prices continued to slow (to 17.1% yoy)

The pace of growth in natural gas prices for households fell sharply due to the waning of the low base effect and because of the option for households to have an annual gas contract with a fixed price. Tobacco products prices also rose more slowly amid expanded supply. This outweighed the hike in the cost of public transport in some cities and the rise in alcohol prices.

Fuel price growth rates continued to decline (to 31.2% yoy)

This was largely due to the slowdown in global oil price growth in previous periods. The introduction of government regulation of the fuel market in May 2021 also had a certain impact.

By NBU estimates, this year’s inflation will peak in September–October 2021. Going forward, however, the growth in consumer prices will decelerate to single digits at the end of the year.

The NBU will publish its new macroeconomic forecast on 21 October 2021 during a press briefing on decisions taken by the central bank’s Board. More details of the forecast will be given in the Inflation Report to be made public on 28 October 2021.

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