Inflation exceeds 22% in July – NBU names reasons

This was reported by the National Bank’s press service, according to Ukrinform.

"In July 2022, consumer inflation accelerated to 22.2% in annual terms (from 21.5% in June). In monthly terms, prices were up 0.7%," the report said.

The growth of inflation in Ukraine is primarily due to the consequences of Russia's terrorist actions and temporary occupation of certain territories. Among them is disruption of supply chains, destruction of production facilities and infrastructure, reduction of supply, increase in production costs, and significant forced migration within the country. Price growth is restrained by the freeze of gas and heat tariffs, as well as partial restoration of supply chains.

Actual consumer inflation accelerated as expected, while being slightly below the trajectory of the baseline outlook published in the July 2022 Inflation Report.

Core inflation in annual terms accelerated to 16.7% from 15.2% in June, the NBU noted.

The growth rate of processed food prices increased to 22.6% year-on-year. Meat and fish products, butter, margarine, confectionery, and non-alcoholic beverages became more expensive. The prices of sunflower oil grew at a higher rate against the background of expectations regarding intensified exports and its high value on global markets.

Growth in the value of non-food products accelerated to 11.7% y/y, including automobiles, household goods (dishes, furniture, and appliances), electronics, pharmaceuticals, and personal hygiene products. The decline in prices for clothing and footwear has slowed down. This is due to the exhaustion of old stocks, limited supply of new goods, and increased logistics costs, as well as the realization of the delayed demand of citizens returning to their places of residence.

The growth of the cost of services accelerated to 14.9% y/y. Telecommunication and medical services, services of beauty salons, gyms, dry cleaning and public catering establishments became more expensive. In the future, the cost of services related to housing repair grew at a higher rate, against the background of significant demand from citizens who returned to their places of residence, and a shortage of certain consumables and labor.

At the same time, as noted by the NBU, the increase in the cost of housing rent, accommodation in hotels and boarding houses slowed down significantly. This is due to the weakening of demand for such services, as well as the disrupted tourist season.

The growth of consumer prices in July turned out to be slower than predicted by the National Bank. However, high core inflation indicates the persistence of significant fundamental inflationary pressure. According to the NBU's outlook, inflation will accelerate by the end of this year and start to decline in early 2023.

As reported, according to the forecasts of the National Bank, in 2022 inflation will reach 31%, while GDP will shrink by a third. In the coming year, the economy is expected to return to growth, and inflationary dynamics – to decline.