NBU September 2024 Inflation Update

In September 2024, consumer inflation accelerated to 8.6% yoy from 7.5% yoy in August.
In monthly terms, prices increased by 1.5%.
This is according to data published by the State Statistics Service of Ukraine.
The actual rates of price growth were above the forecast published in the July 2024 Inflation Report.
 The deviation from the forecast was primarily due to a faster acceleration in food inflation fueled by the limited supply of certain food products.
Underlying inflationary pressures also intensified by more than projected.
Specifically, core inflation increased to 7.3% in September from 6.5% in August.
These developments were driven by the rise in processed-food prices due to the higher cost of raw food inputs and the further increase in production costs, including those of energy and labor.
Price pressures were also underpinned by pass-through effects from the depreciation of the hryvnia exchange rate in previous months.
Growth in raw food prices accelerated sharply, to 7.1% yoy
Hot, dry weather affected the crop yields, ripening times, and quality parameters of a range of vegetables and fruits, reducing their supply.
In particular, borshch vegetables and tomatoes increased in price more quickly.
The pace of growth in cucumber prices also remained high.
The increase in raw food inputs and business costs affected the prices of flour and cereals.
The growth in milk prices accelerated, fueled by limited supply amid persistently strong demand from dairy businesses and a pickup in exports.
Chicken prices returned to growth, while pork prices continued to decrease.
Sugar and egg prices also kept declining due to high supply.
Rise in administered prices accelerated slightly, to 14.0% yoy
Prices for tobacco products increased more sharply, including due to efforts to combat shadow-market supply.
Prices for alcoholic beverages decreased somewhat more slowly, likely due to hikes in some of the excise taxes.
The growth in prices for pharmaceuticals and healthcare products and equipment accelerated, likely due to the exchange rate factor and an increase in the prevalence of disease.
As before, inflation was restrained by the moratorium on raising certain utility tariffs for households.
Growth in fuel prices decelerated sharply, to 6.0% yoy
The first phase of the increase in the excise tax on fuel, effective 1 September, was primarily reflected in LPG prices, whereas low oil prices and large stocks curbed the growth in gasoline and diesel prices.
Core inflation rose to 7.3% yoy
The growth in processed-food prices accelerated sharply, to 8.9% yoy.
The rates of growth in prices for bread and certain flour and confectionery products increased significantly due to higher production costs.
Prices for most fermented-milk products, cheeses, and butter continued to increase, reflecting a limited supply of dairy raw material, an increase in purchase prices, and a pickup in commodity exports.
Prices for certain imported goods, such as coffee, tea, chocolate, and olive oil, also rose faster.
The fall in sunflower oil prices decelerated due to price developments in global markets.
Intensified pressure from production costs halted the long-lasting slowdown in the growth of prices for meat products.
The growth in prices for nonfood products accelerated moderately (to 2.2% yoy), primarily due to the impact of the exchange rate factor in previous months.
The decrease in prices for clothing and footwear held steady from the previous month, likely driven by increased competition between domestic and imported products.
Services prices also increased somewhat faster – by 10.9% yoy – under pressure from business costs of labor, energy, and food products.
Specifically, prices rose more sharply for healthcare, communications, education, and restaurant and hotel services.
In contrast, the growth in the prices of insurance, transportation, and car maintenance decelerated.
Inflationary pressures will persist in the coming months due to increased budget expenditures, further aggravation of labor market mismatches, and an expected increase in power shortages during the heating season.
The NBU’s monetary policy will be aimed at keeping inflation moderate this year, slowing it gradually from H2 2025, and bringing it back to its 5% target.

These and other factors will inform the NBU’s monetary policy decisions and an updated macroeconomic forecast that will be released on 31 October 2024 during the press briefing on the results of the NBU Board’s decision on monetary policy issues.
A more detailed macroeconomic forecast will be published in the Inflation Report on 7 November 2024.