In February 2021, consumer inflation accelerated to 7.5% yoy (up from 6.1% yoy in January). In monthly terms, prices grew by 1%. This is according to data published by the State Statistics Service of Ukraine.
Actual consumer inflation came out higher than in the projected trajectory published in the January 2021 Inflation Report. This was primarily due to the higher-than-expected rise in prices for certain foods and fuels. However, inflation was constrained by the introduction of a price ceiling for natural gas. Underlying inflationary pressures, expressed in terms of core inflation, were close to the NBU’s projections.
- Core inflation sped up (to 5.6% yoy from 5% yoy in January).
Prices for processed food rose more quickly (by 7.2% yoy). An important factor in accelerating the prices in this group of goods was the further pass-through effects of last year’s low harvests in Ukraine and globally. In particular, sunflower oil continued to rise sharply in price, as did the products made with it (mayonnaise, margarine, and spreads). Further increases in the cost of ingredients (flour, sunflower oil, and sugar) and energy prices fueled the rise in prices for bread and flour-based foods. Higher input costs also affected prices for meat products, butter, and cheese. The growth in prices for rice, fish products, dried fruit, and ketchup also accelerated.
The pace of increases in nonfood prices stayed flat (2.6% yoy). On the one hand, the rise in prices for pharmaceuticals and cars slowed, while prices for personal care products, cleaning products, and toys extended their decrease. On the other hand, prices for household appliances, furniture, and jewelry grew more quickly, while prices for home textiles and electronic devices fell more slowly. Clothing and footwear prices continued to fall, though at a slower pace. This may have reflected the fading impact of the pandemic on these goods, as well as the ongoing pass-through, more protracted for this group, of the hryvnia’s weakening in the fall last year.
The growth in services prices accelerated slightly (to 6.9% yoy). Stronger consumer demand and higher production costs, including wages, spurred the rise in prices for catering, tourism, financial and healthcare services, housing rentals, and driving lessons. At the same time, the rise in prices for cable TV and the internet decelerated.
- Raw food prices increased more quickly (by 9.7% yoy).
As production shrank and feed grew more expensive, meat prices increased significantly, especially those for chicken, beef, milk, and eggs. Sugar and flour became markedly more expensive due to high global prices and poorer harvests of sugar beet and wheat. Amid a drawdown of stocks, apple prices rose faster, while banana prices returned to growth in the wake of an increase in import prices due to crop failures in major producer countries. In addition, the prices of borshch vegetables fell more slowly as their stocks declined. At the same time, the fall in prices for cucumbers and tomatoes deepened due to an increase in the supply of both imported and domestic greenhouse produce.
- The growth in administered prices accelerated (to 12.1% yoy).
Prices for alcoholic drinks continued to grow, in part due to higher price floors for sparkling wines in January. Despite a further reduction in prices by natural gas supply companies, the growth in natural gas prices accelerated due to a low comparison base effect. Increases in these prices in previous periods affected the prices of hot water supplies and heating.
- Fuel prices returned to growth (up 4.8% yoy after a 4.7% yoy drop in January), driven by rising global oil prices and still strong demand from households.
In the next few months, inflationary pressures will remain significant. This will be driven by the effects of the lower crop yields seen last year, higher energy prices, and growing consumer demand as the economy recovers.
Inflation will begin to slow in H2 2021 as the new harvest arrives and the effect of the low comparison base fades. These factors, amplified by the NBU’s key policy rate hike, will gradually reverse the dynamics of inflation. The NBU currently projects that inflation will return to the 5% ± 1 pp target range in H1 2022.
On 15 April 2021, during a press briefing on decisions taken by the NBU Board, the central bank will make public its new macroeconomic forecast, including inflation projections for 2021–2023. A more detailed macroeconomic forecast will be published in the NBU’s Inflation Report on 22 April 2021.