In April 2017, headline inflation slowed to 12.2% yoy, down from 15.1% yoy in March. In monthly terms, the CPI increased by 0.9%, according to data released by the State Statistics Service of Ukraine (SSU).
The rapid slowdown in annual inflation in April was expected, reflecting the waning effect of a number of administered factors. In particular, natural gas tariffs surged in April 2016, which affected this year's comparison base.
Actual inflation was slightly below the projected path of annual headline inflation published by the National Bank of Ukraine in the Inflation Report (April 2017), envisaging a slowdown in the annual CPI to 9.1% by the end of 2017. The shortfall can be attributed to weaker-than-expected inflationary pressures caused by fundamental factors.
- Core inflation remained flat at 6.3% yoy (stood at 0.6% mom), while a slight acceleration was expected due to a continuing pass-through from increased production costs, including higher labor costs, as well as rising raw food prices, in particular meat prices. The above factors were in play, pushing up prices for processed foods and selected services included in the core CPI. However, their effect was offset by other factors. Thus, a further strengthening of the hryvnia and improved inflation expectations contributed to a slower pace of increase in prices for clothing and footwear in April. In addition, prices for textiles, household appliances, pharmaceutical products continued to decelerate, while prices for some goods (audiovisual equipment, laptops and mobile telephones) remained lower than last year.
- Raw food price growth accelerated to 10.0% yoy in April (were up by 2.0% mom). This acceleration was anticipated and was, in particular, due to a low base effect (last year trade and transit restrictions imposed by Russia on Ukrainian as well as Turkish goods caused a sharp decline in prices for raw foods in Ukraine). A smaller supply of fruit and vegetables compared to the last year, particularly due to a pick-up in exports and lower imports, contributed to deceleration in the annual growth of prices for vegetables and a recovery in fruit prices. In addition, prices for meat and raw milk accelerated, reflecting an increase in production costs and robust exports. Meanwhile, in April, prices for eggs continued to decline in monthly terms, while the pace of annual price growth decelerated as partial export restrictions on poultry-related products were maintained.
- The growth of administered prices and tariffs decelerated to 25.7% yoy (stood at 1.2% mom). This deceleration was primarily due to the dissipating base effect linked with a surge in natural gas tariffs in April 2016. In addition, despite further increases in excise taxes on alcoholic beverages from 1 April 2017, prices of these products slowed down slightly. Prices for tobacco products also decelerated slightly as a favorable base effect faded away. Meanwhile, prices for postal services accelerated in April due to the reflection of higher tariffs charged by "Ukrposhta" JSC for its services as well as increased prices for postal services rendered by private postal service providers. In addition, as in the previous month, an important factor behind administered prices acceleration was the increase in fares for passenger road transportation services, driven by rising costs.
- Fuel prices decelerated to 21.3% yoy (were up by 1.2% mom), although prices for liquefied gas accelerated due to supply disruptions from the Russian Federation.
Current CPI and its components’ developments confirm that inflation will stay within the target band of 8% ± 2 pp by the end of 2017, which was set out in the Monetary Policy Guidelines for 2017 and the medium term.