Inflation in Ukraine: it became known as prices rose and their Outlook for the future

Инфляция в Украине: стало известно, как выросли цены и их прогноз на перспективу

In January — November of the current year consumer prices grew by 8.9%. In annual terms (compared to November 2017) inflation was 10%. On a monthly measurement of prices rose 1.4%. Core inflation in November 2018р. compared to the previous month was 1.1%, from the beginning of year — 8,1%. This is evidenced by data published by the State statistics service.

It is worth noting that inflation in annual terms in November was close to forecast, which is published in the October “Inflation report” of the National Bank of Ukraine. Improving the National Bank discount rate (in the current year the rate was increased four times) restrain inflation throughout the year. Somewhat higher core inflation and growth of administratively regulated prices is almost completely offset by the low growth rates in crude food items.

Инфляция в Украине: стало известно, как выросли цены и их прогноз на перспективу

Figure — price Change (in% to previous month)

  • The dynamics of the rate of core inflation in November, which accelerated to 8.9% y / y, led to the growth of prices for services under the influence of further growth of production costs, particularly labor costs, and pressure from consumer demand. The rate of price rise of food products with a high degree of processing remained at the level of 10.0% yoy. growth of prices for nonfood goods also slowed marginally (up 4.4% yoy).
  • The rising prices of raw food in November accelerated to 2.4% yoy, but was lower than predicted.
  • The growth rate of the administratively regulated prices increased to 17.3% y / y. In particular, in November has increased the natural gas tariffs for the population (22.9%) and local telephony services. Moreover, the high pace continued to increase the price of alcoholic beverages, tobacco products, transport to road transport.
  • The decline in world oil prices and the strengthening of the hryvnia exchange rate contributed to slower growth in fuel prices.

Promulgated by the state statistics data show that the trend of rising prices on the consumer market that has developed since September continues. However, the pace of price growth to 1.9% in September and 1.7% in October, 1.4% in Nov have slow character.

In November, the highest growth rates in the group “Housing, water, electricity, gas and other fuels” by 6.1%. Primarily this is due to the increase in the cost of natural gas 22.9%. Sewage services rose compared to October by 2.5%, hot water and heating increased in price by 2.3%, water — 2.1%.

The growth of prices in the group “Communication” by 1.7% due to the rise in price of services of mobile operators.

So, this year, growing consumer demand, is an important factor of inflation. Income growth has led to consumer demand, because the real wages in October 2018 compared to the corresponding period last year increased by 14.2%. Increases significantly, and lending of the population — as of the end of October, the debt of households was 17.6% more than at the beginning of the year. So, to a large extent the factors of inflation are demand-side.

It should be noted the problem of rising producer prices. The producer price index — the indicator of average changes in wholesale prices for raw materials, materials and goods of intermediate consumption, which sell their products to national producers. It covers all stages of production. The growth of producer prices can tell us about the retention or acceleration of consumer inflation at the beginning of next year (generally producer prices with a certain lag time translated into consumer prices). And the reason for concern is the growth of producer prices in the current period, largely due to the increased cost of production costs. In November, producer prices of industrial products grew compared to the previous month by 1.7% in annual terms (November 2018 to the corresponding month of the previous year) producer prices grew by 16.5%.

Given the cumulative effects factors influencing inflation in the country, the likelihood of achieving the priority objectives of the NBU to reduce consumer price inflation to 6 ± 2 p. p. in the current year, as determined by the Basic principles of monetary policy for the year 2018 and the medium term, remains a desirable, but unlikely. And yet there are prerequisites for achieving inflation target of 5 ± 1% in the medium term, as noted in the National Bank of Ukraine. It is this benchmark of achieving inflation target of 5 ± 1% in the medium term indicated in the Basic principles of monetary policy of the NBU. This inflation target is higher than in developed countries, but close to the inflation targets countries with emerging markets. NBU commented on the target at 5%, as historically high and volatile inflation with a high amplitude of inflationary shocks.