NBU August 2024 Inflation Update

In August 2024, consumer inflation picked up to 7.5% yoy from 5.4% yoy in July.
In monthly terms, prices grew by 0.6%.
This is according to data published by the State Statistics Service of Ukraine.
The actual rates of price growth were slightly above the forecast’s trajectory published in the NBU July 2024 Inflation Report. At the same time, underlying inflationary pressures increased more than projected.
Specifically, core inflation rose to 6.5% in August, up from 5.7% in July.
The pickup in the growth of consumer prices was primarily driven by the effects of this year’s lower harvests and higher business costs of food raw materials, energy, and labor.
Pass-through effects from the depreciation of the hryvnia exchange rate in previous months also fueled price pressures.
Raw food prices returned to growth (3.7% yoy)
Prices for sugar and cereals decreased more slowly due to the drawdown of stocks from previous high harvests and because of dry weather.
The increase in flour prices picked up as the costs of raw materials and production rose.
Tomato and cucumber prices grew as supply shrank.
Prices for some borshch vegetables, zucchini, and stone fruits increased faster for the same reason and due to the fading impact of last year’s high harvests.
The growth in milk prices accelerated, fueled by limited supply amid persistently strong demand from dairy businesses.
The decrease in prices for eggs and certain livestock products decelerated as pressure grew from production costs, particularly energy.
Growth in administered prices edged higher to 13.7% yoy
Prices for alcoholic beverages declined at a slower pace.
In addition, prices for pharmaceuticals and healthcare products and equipment increased more quickly, likely due to the exchange rate factor.
The prices of tobacco products grew at a somewhat lower – though fairly high – pace, driven in part by efforts to combat shadow-market supply.
The moratorium on raising some utility prices for households continued to restrain inflation.
Fuel price growth slowed sharply to 10.1% yoy
These developments reflected the sufficiency of fuel stocks and lower-than-expected global oil prices.
Core inflation picked up to 6.5% yoy
The growth rate of processed food prices rose to 7.4% yoy.
Specifically, the increase in prices for bread and certain flour and confectionery products accelerated significantly due to higher production costs.
Prices for most fermented-milk products, cheese, and butter also went up, reflecting lower output of raw milk, higher purchase prices, increased commodity exports, and power outages in late August.
Some imported goods, such as coffee and tea, also rose in price more quickly.
The decline in sunflower oil prices slowed while the prices of some edible-oil-based products grew faster, driven by price developments in world markets.
By contrast, the growth in meat product prices decelerated thanks to second-round effects from a further recovery in livestock farming.
Prices for nonfood products grew more quickly (1.9% yoy), primarily due to the exchange rate factor.
Meanwhile, clothing and footwear prices declined at a higher clip.
Services prices went up by a slightly faster 10.5% yoy under pressure from businesses’ expenses on labor and energy.
In particular, the prices of healthcare, education, transportation, communications, restaurant and hotel services, personal care, and insurance increased faster.
In contrast, prices for financial services grew at a slower pace, as did car maintenance prices.
Consumer inflation continued to rise in August, but remained subdued and was rather close to the NBU’s forecast.
Inflationary pressures will persist in the months ahead as business costs of labor and energy increase, excise taxes gradually rise, and the effects of the hryvnia’s depreciation in previous months pass through to prices.
The NBU’s monetary policy will continue to be aimed at keeping inflation subdued in 2024 and returning it to its 5% target in coming years.
This will be facilitated by the NBU’s measures to safeguard households’ hryvnia incomes and savings from inflation and ensure the sustainability of the FX market.