Consumer inflation accelerates on weaker hryvnia – National Bank

The National Bank of Ukraine (NBU) says the weakening of the hryvnia, higher energy prices and low yields of certain crops drove the rise in consumer inflation, which accelerated to 2.6% in October 2020 year-over-year (y-o-y) from 2.3% in September 2020.

Food prices growth rate increased as well, to 3.4% y-o-y, the regulator's press service said on its website on November 10.

"Prices of vegetable oil rose quite quickly against the backdrop of low sunflower yields and high export prices. This, in turn, had an impact on the prices of mayonnaise and margarine. In addition, the growth rate of bread and pasta prices also rose due to higher prices of raw materials and energy resources," the report said.

Weakening hryvnia rate

Non-grocery products grew in prices at a high rate (0.8% y-o-y), primarily due to the weakening of the hryvnia, Ukraine's national currency. Prices of household appliances, furniture, and cars accelerated, while the slide in prices of electronics slowed down. At the same time, clothing and footwear remained cheaper than last year, partly due to weak demand, mainly over citizens' switch to distance learning and work from home.

"The growth rate of services' cost slowed down to 6.4% y-o-y. On the one hand, the slowdown was expected over the exhaustion of the comparison base effects for certain services, including telecommunication. On the other hand, probably, the effects added due to increased incidence rate and stepped up [quarantine] curbs in certain areas. In particular, the growth of the cost of services rendered by catering facilities, hotels, cinemas, beauty salons, foreign language courses, and home rental agencies has slowed down. At the same time, prices of health care services have accelerated over the escalating epidemic situation," the press service added.

Fall in fuel prices

Reduction in fuel prices slowed down slightly, to 16.6% y-o-y. The decline in global oil prices was offset by significant demand for fuel due to the high intensity of car use amid the pandemic, as well as the weaker hryvnia.

Read alsoInflation in Ukraine accelerates to 2.4% in OctoberConsumer inflation remains below the target range of 5% +/- 1 percentage point. However, with the revival of economic activity against the backdrop of maintaining a soft monetary and fiscal policy, as well as due to rising energy prices, inflation is expected to accelerate and reach the target range by year-end. At the same time, the return to the target range may take more time over the rising COVID-19 incidence rate and tougher quarantine-related curbs, the regulator said.

Memo

Consumer inflation in Ukraine in October 2020 vs. October 2019 accelerated to 2.6%, according to the State Statistics Service.

Consumer prices rose by 1% in October 2020 compared from September 2020 and by 2.7 % in January-October 2020.