NBU November 2024 Inflation Update

In November 2024, consumer inflation picked up to 11.2% yoy from 9.7% yoy in October.
In monthly terms, prices rose 1.9%.
This is according to data published by the State Statistics Service of Ukraine.
The actual rates of price growth exceeded the trajectory of the forecast outlined in the October 2024 Inflation Report.
One of the main drivers of the sharper increase in inflation was the continued acceleration in food prices.
Lower-than-expected yields of certain crops caused their supply to contract and fueled an increase in the prices of food industry inputs.
Administered prices also grew somewhat faster than expected.
Underlying inflationary pressures also intensified by more than projected: core inflation rose to 9.3% yoy in November from 8.3% yoy in October.
These developments were driven by faster increases in processed-food prices due to higher costs of raw food inputs, and by further growth in business costs related to energy, labor, and pass-through effects from currency depreciation in previous periods.
Growth in raw-food prices accelerated sharply to 15.7% yoy
This year’s hot summer and fall with long dry spells had an adverse effect on the crop yields, ripening times, quality, and supply of a number of vegetables and fruits.
As a result, prices for borshch vegetables, cucumbers, and apples rose faster.
Pressure from business costs was also intensifying as retail chains and warehouses purchased more-expensive power to store finished products, among other costs.
The growth in raw-material and feed prices and production costs, including energy, affected the prices of flour, cereals, milk, eggs, and meat.
Core inflation rose to 9.3% yoy
The growth in processed-food prices accelerated sharply to 12.5% yoy.
The rates of growth in prices for bread, as well as flour-based and confectionery products, increased because of higher business costs.
Dairy product prices continued to grow, pushed higher by rising purchase prices of raw milk and increasing production costs, as well as by growing demand from European traders for Ukrainian-made butter.
Price increases for certain imported goods, such as coffee, tea, chocolate, fish, and seafood, gathered speed.
Sunflower oil prices surged, propelled by rising global prices and strong export demand.
Intensified pressure from business costs led to a faster increase in meat product prices.
Prices for nonfood products grew more quickly (3.6% yoy), primarily due to the exchange rate factor in earlier periods.
This was the likely reason for the slowing of price decreases for clothing and footwear.
 
Services also rose in price a bit faster, up 11.2% yoy.
Specifically, prices grew more rapidly for financial and communication services, education, culture and recreation, restaurant and hotel services, and personal care.
In contrast, the growth in the prices of transport services, car maintenance, and insurance decelerated.
Increase in administered prices picked up to 15.1% yoy
Prices for alcoholic beverages and tobacco products increased more sharply, including due to the exchange rate effects of previous months and efforts to combat shadow-market supply.
A hike in excise taxes on tobacco products, effective 1 January 2025, may also incentivize manufacturers and importers to raise prices in advance.
The growth in prices for pharmaceuticals and healthcare products and equipment accelerated.
As before, administered inflation was restrained by the moratorium on raising certain utility tariffs for households.
Rise in fuel prices decelerated sharply to 0.6% yoy
Demand in the fuel market remained subdued amid an ample supply and a predominantly downward-sloping trend in global crude oil prices.
Inflationary pressures will persist in the coming months due to the supply of certain food products being lower than last year and because of significant budget expenditures, high wage growth, and power shortages during the heating season. However, the NBU expects that next year, inflation will gradually return to a downward trajectory and continue to move towards the NBU’s target of 5%.
This will be facilitated by the gradual improvement of energy sector conditions, the anticipated increase in crop yields, an easing of external price pressures, as well as the NBU’s interest rate and exchange rate policy measures.