OREANDA-NEWS. In July 2016, headline inflation accelerated to 7.9% y-o-y. Data released by the State Statistics Service of Ukraine  suggest that  deflation was recorded at 0.1% in month-on-month terms. 

The annual inflation reading was in line with the NBU’s inflation projections published in the July Inflation Report that projects that inflation will return to 12% by the end of 2016.

As in the previous month, the decline in core CPI inflation and a decrease in raw food prices contributed to the monthly deflation in July.

As expected, core CPI declined by 0.4%  m-o-m (annual core inflation eased to 7.9%). In July, prices for vehicles,  pharmaceuticals, medical products and equipment, as well as audio equipment, and  photographic and information processing equipment fell, reflecting the strengthening of the hryvnia observed in the previous months, lower inflation expectations and weak demand.  These factors, coupled with seasonality, have contributed to a marked decline in prices for clothing and footwear.

• Raw food prices fell by 1.7% m-o-m, primarily reflecting a sharp seasonal drop in prices for “borshch vegetables” and selected fruit.  The high supply of fruit and vegetables, including those produced domestically, contributed to the fall in prices. However, the decline in prices came in slightly below expectations.

• In July, administered prices and tariffs recorded a lower-than-expected m-o-m increase of 1.6%. The shortfall can largely be attributed to the partial reflection of upward adjustments in utility tariffs for hot water supply in price statistics as hot water supply was not available in some regions. Accordingly, following  the resumption of hot water supply, upward adjustments in utility tariffs will be reflected in price statistics.