In August 2018, consumer price inflation, at 9.0% yoy, remained virtually unchanged from the previous month (8.9% yoy in July). In month-on-month terms, consumer prices held steady. This is according to data released by the State Statistics Service of Ukraine.
In August, inflation was close to the forecast path published in the July 2018 Inflation Report, which assumed an increase in gas tariffs for population. After factoring out the contribution of an increase in gas prices from the July forecast, August inflation was slightly higher than the NBU expected. This was largely due to the faster-than-expected growth in other administered prices and fuel prices.
- Core inflation decelerated slightly in August, to 8.7% yoy, and was broadly in line with the forecast. Indeed, the growth in the prices for processed foods slowed down more quickly than expected. This resulted, among other things, from a slower growth in raw food prices, including due to more ample domestic and imported supplies, and a decline in global dairy and meat product prices. Correspondingly, there has been a continued slowdown in the growth of prices for meat and dairy products, including butter.
- The growth in the prices for clothes and footwear also decelerated on the back of the strengthening of the hryvnia against a basket of the currencies of Ukraine’s trading partners that was seen in H1. At the same time, August’s weakening in the hryvnia caused the prices for other, mostly imported, non-foods, such as household appliances, cars and dishware, to rise slightly faster.
- Service prices rose at a steady pace. The growth in catering prices decelerated on the slower growth in food prices. In the meantime, the growth in the cost of personal care services, travel services, and home renovation services accelerated, reflecting continued pressure from consumer demand and a significant share of imported inputs in the costs of some services.
- Although accelerating in August, the pace of growth in raw food prices remained low, and was in line with the forecast. Vegetable prices grew at a slightly faster pace than expected. Meanwhile, fruit prices expectedly deepened their decline, driven by the bountiful harvest of apples, some other fruit, and berries.
- The pace of growth in administered prices, at 13.8% yoy, remained at the previous month’s level; however, it was higher than anticipated. Specifically, there was a more significant increase in prices for urban public transport in Kyiv and some other cities, and in airline fares, reflecting higher fuel prices and wage costs. At the same time, the growth in tobacco and alcohol prices slowed, partly offsetting the growth in the prices of transportation services.
- Fuel prices rose at a faster pace (19.7% yoy) and were somewhat higher than expected, due to a rise in global oil prices.
Despite the easing food price inflation, underlying inflationary pressures have remained elevated amid sustained consumer demand. In addition, the faster growth in fuel prices and robust wage growth have spurred administered price inflation. A new inflation forecast incorporating the above factors will be announced after the Board’s meeting on monetary policy issues, which is set for 25 October 2018. The forecast will be published in the central bank’s Inflation Report on 1 October 2018.