Data released by the State Statistics Service of Ukraine show that in May 2016, headline inflation slowed to 0.1% m-o-m, bringing the annual reading to 7.5%.
The May inflation figures were in line with the NBU’s projections published in the April 2016 Inflation Report.
The price dynamics observed over the month reflected both weaker inflation pressures and upward adjustment in administered prices.
Core inflation eased at a slightly faster-than-expected pace in May, standing at 0.2% m-o-m and 8.8% y-o-y. The moderation in core inflation pointed to lower inflation pressures. As before, the appreciation of the hryvnia, subdued consumer demand, as well as spillover effects from the decline in prices for select crude foodstuffs have contributed to the slowdown in core inflation.
In particular, prices for vegetables decreased by 5.8% m-o-m due to the seasonal increase in the supply of domestically produced and imported vegetables. In May, following a seasonal pattern, prices for milk and dairy products declined amid ongoing low global prices for dairy commodities. Weak consumer demand and the increased supply pushed down sugar prices.
At the same time, there was a seasonal increase in meat and meat products. The increase in prices for raw foods ahead of the Easter holidays was reflected in the NBU’s inflation projections for May 2016. As a result, raw food prices rose 0.2% m-o-m in May.
In May, administered prices decreased by 0.5% m-o-m. Natural gas tariffs for households were reduced by 4.3%, effective from 1 May 2016. Last month saw a rise in prices for alcoholic beverages and tobacco products reflecting the lagged effects from increases in excise taxes in Q1 2016 and the pricing policy pursued by some producers.
The rally in global oil prices pushed domestic fuel prices further up (by 5.8% m-o-m).
The dynamics of headline inflation and its components suggest that the end-year headline inflation target of 12 +/-3 % y-o-y is within reach.