NBU July 2024 Inflation Update

In July 2024, consumer inflation accelerated to 5.4% yoy, up 4.8% in June.
In month-on-month terms, prices did not change.
This is according to data published by the State Statistics Service of Ukraine.
The actual rates of price growth were slightly below the trajectory of the forecast published in the NBU’s July 2024 Inflation Report.
This was primarily due to the hot weather having a more moderate impact on raw food prices than expected.
Conversely, underlying inflationary pressures increased.
Core inflation was 5.7% yoy in July, up from 5.0% yoy in June.
These dynamics were ahead of the trajectory in the NBU"s July forecast.  They were driven primarily by a faster rise in the price of processed foods due to higher energy, storage, and labor costs.
Price pressures were also added to by the pass-through effects of a weaker hryvnia.
At the same time, inflation expectations remained rather stable.
The decline in raw food prices decelerated, to 4.8% yoy
Prices for sugar and cereals fell more slowly due to the depletion of stocks from previous large harvests.
Tomato prices also slowed their decline, while cucumber prices rose significantly due to a lower supply of quality products amid more challenging weather conditions than last year.
The growth in raw milk prices accelerated due to the hot weather, and the price of bananas rose amid stronger external demand.
Instead, stone fruits and watermelons became cheaper.
Prices for apples and some of the borshch vegetables also decreased due to increased sales of products from warehouse stocks amid hot weather and frequent power cuts.
Despite the hot weather, egg prices continued to fall.
The second-round effects of weaker pressure on feed costs continued to drive down the prices of pork and chicken.
The growth in administered prices accelerated slightly, to 13.4% yoy
Prices for alcoholic beverages declined more slowly.
In addition, prices for pharmaceuticals and healthcare products and equipment grew more quickly, likely due to the exchange rate factor.
The rise in the price of tobacco products slowed, but prices continued to rise at a fairly high rate, including as a result of the fight against illicit products.
The moratorium on raising some utility prices for households continued to restrain the increase in administered prices.
The growth in fuel prices slowed, to 17.6% yoy
These dynamics reflected base effects due to the return of fuel taxation to pre-war levels in July 2023, ample stocks, and lower demand from the agricultural sector.
At the same time, fuel prices were affected by the pass-through effects of the exchange rate depreciation and rising commodity prices on global markets.
Core inflation picked up to 5.7% yoy
The growth in prices for processed foods accelerated to 6.5% yoy.
In particular, prices for bread, certain flour products, and confectioneries increased more rapidly due to higher production costs.
Prices for most fermented dairy products and butter also rose, driven by a decline in raw milk production, power outages, and the spoilage of finished products in retail chains.
Prices for certain imported goods, such as chocolate, coffee, and tea, also rose faster.
Sunflower oil prices slowed their decline amid rising global prices, the hot weather in Ukraine, and a reduction in the supply of raw materials from the 2023 harvest, while prices for edible-oil-based products accelerated their growth.
On the other hand, the rate of increase in the price of meat products continued to decline due to second-round effects from the further recovery in animal breeding.
Prices of non-foods accelerated (by 1.2% yoy), which was due to the exchange rate factor.
In particular, prices for clothing and footwear fell more and more slowly, while prices for other non-foods accelerated.
Services also grew faster – by 10.3% yoy, likely under pressure from business costs for labor and energy.
In particular, prices for healthcare, transportation, and communications services grew more rapidly.
In contrast, the growth in the cost of educational, insurance, and financial services, car maintenance, and personal care services slowed.
Consumer inflation continued to rise in July as expected, given the gradual waning of the temporary factors that were restraining it in H1 2024.

In the coming months, inflation is expected to accelerate further, primarily due to higher business costs for labor and electricity, higher excise taxes, and the pass-through effects of the hryvnia depreciation seen in previous months.

At the same time, inflation will remain moderate in 2024.
This will be facilitated by measures taken by the NBU to protect hryvnia income and household savings from inflation and to ensure the sustainability of the FX market.