Ukraine sees deflation of 1.3 percent
State Committee of Statistics says food, clothing and footwear prices fell in JulyDeflation was 1.3 percent this July in Ukraine, the State Committee of Statistics reports. Food prices showed the largest decrease, falling by 2.6 percent, with vegetables prices going down by 32.6 percent, the greatest fall of the period. Clothing and footwear prices fell, too, having ended the month with 0.1 percent drop. However, alcohol, tobacco and utilities prices went up by 0.2 percent. The costs of healthcare rose by 0.8 percent, while education became 0.3 percent more expensive. The committee has recorded consumer prices falling for the first time since July 2010.
Accordingly, the Ministry of Economic Development reduced the inflation forecast for 2011 by 0.3 percentage points to 8.9 percent. As the Deputy Minister of Economic
Development and Trade of Ukraine Vadym Kopylov noted, inflation for the first half of this year reached 5.9 percent, with price increases coming to a complete halt in July. He also said there was going to be a seasonal decline in food prices coming soon (in July-September this year). “This process has already begun,” Kopylov said commenting on the latest data.
The head of the Forex Club research center in Ukraine Mykola Ivchenko agrees that this year’s deflation is caused by lower food prices. The analyst adds that price increases in transport services, uti-lities, alcohol and tobacco have slowed down markedly, too. How-ever, Ivchenko stresses, food is cheaper now for Ukrainians mostly because of the traditional seasonal reduction of the prices for vegetables and fruits. As for meat, fish, butter and eggs, the expert says, all these goods have gone up strongly, which is unusual for a summer month. Thus, according to Forex Club, prices for meat and products of it increased by 2.8 percent, fish went up by 1.1 percent, butter is 3.1 percent more expensive, and eggs price is now 10.8 percent higher.
The main catalyst of inflation is the price for transport services, but, as the analysts stress, they slowed down significantly, with price increase rate falling from 0.8 percent to 0.7 percent. “It happened mainly due to the 0.2 percent fall of fuel and motor oil prices last month, against the backdrop of declining global oil prices,” Ivchenko explains. Utilities prices rose by 0.2 percent in July, while their increase in June was twice as much totaling 0.4 percent, according to the Forex Club’s calculations. The analysts explain that it is caused by the slower growth in housing services’ costs and water price. A moderate rise in alcohol and tobacco prices (0.2 percent compared to 0.4 percent in June) has been made possible by significant wholesale turnovers in those markets and the holiday season.
According to Ivchenko, should the abovementioned trends be sustained, we will have close to zero inflation in August. The analyst says that a lack of growth in fuel prices which is expected due to lower global oil prices, as well as the traditional seasonal reduction of the prices for vegetables and fruits, will contribute to price stability. However, the analysts stress, meat, fish, milk and eggs prices remain very vulnerable. These goods, the Forex Club experts believe, may well make the basket of goods too “hot.” The analysts are less optimistic when forecasting the annual growth rate of consumer prices in Ukraine than the ministry experts are. According to the Forex Club experts, we will have 11 percent inflation in 2011.
