NBU explains reasons for accelerated inflation in April

Author

Valery Moiseev

In April, consumer inflation in annual terms accelerated to 16.4% (from 13.7% in March). Over the month, prices increased by 3.1%. Such data was provided by the State Statistics Service.

The NBU believes that the main factors behind the accelerated of inflation were:

supply chain disruptions;
increase in business costs;
physical destruction of enterprise assets.

The uneven demand and supply of goods in regions also impacted the situation. For instance, the realization of pent-up demand for goods and services in relatively calm regions amid a gradual return of citizens fuels price increases. In the occupied cities and regions with a high intensity of hostilities, the lack of goods was a significant factor.

The rates of growth in prices for processed food products accelerated to 19.3% in annual terms (from 16.6% in March). Dairy, meat, fish, and flour products rose in price faster than others.

The rates of growth in prices for goods with a significant import component in the prime cost increased due to the reduced possibilities for their supply and the loss of stocks in warehouses. These include: coffee, tea, juices, chocolate, spices, and dried fruits.

Price increases in sunflower oil slowed down due to limited export opportunities and comparison base effects.

Prices for non-food products grew at a faster pace (by 6.6% in April, while in March — by 3.6%). The price hike for medications and a number of personal care products accelerated due to rising costs for their production and marketing, as well as an increase in demand.

The realization of pent-up demand and limited supply amid the physical destruction of stocks led to higher prices for electronics and household goods.

At the same time, the fixation of the hryvnia exchange rate, the abolition of import taxes, and the general decrease in consumer demand held back the growth in prices for non-food products. In particular, clothing and footwear fell in price.

The growth in the cost of services accelerated to 12.8% (from 11.3% in March). The cost of rental housing has increased due to high demand in relatively safe western regions. The cost of housing repair services rose due to increased demand in the liberated regions and the resumption of housing construction. The cost of taxi services has increased due to fuel shortages and limited traffic in many regions, as well as beauty salons and catering services due to increased demand.

Price growth rates for dry cleaning services and medical services remained at theMarch level, while for cinema services they decreased. This is due to a decrease in consumer spending for these purposes.

The growth of prices for raw foodstuffs significantly accelerated (up to 25.6%). Vegetable prices have accelerated as a result of disrupted supply chains, rising energy costs and the temporary occupation of vegetable-growing areas in the south, specializing in the cultivation of vegetables. These same factors, together with a halt in imports through ports, led to an acceleration in the price of fruits, including bananas and citrus fruits. Cereals and livestock products — pork, milk, and fish — rose in price at a high rate. At the same time, egg prices dropped significantly due to high supply.

Growth rates of administratively regulated prices increased (up to 14.2%). Alcoholic beverages rose in price quickly, given the growth in demand amid easing restrictions on sales and reduced supply. Growth rates for tobacco products accelerated as a result of a reduction in production in Ukraine and the entry of more expensive imported products into the domestic market. The growth of administrative prices was held back by fixed tariffs for most types of utilities.

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The risks of intensifying inflationary processes remain significant with the continued full-scale military aggression and the destruction of food warehouses, trade establishments, the blocking of ports, and damage to transport infrastructure.