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Sep 10, 2012

Consumer inflation dynamics caused by reduction of food prices

Ukraine Business

“Prices for foodstuffs fell by 0.5% mainly at the expense of a seasonal fall of prices for fruits and vegetables”

KYIV, September 10, 2012 (UBO) – As over the previous months, consumer inflation dynamics in August was caused by reduction of food prices, which occupy 54% of the consumer basket, Olena Bilan, Dragon Capital chief economist said.

“Inflation in August coincided with our expectations. Prices for foodstuffs fell by 0.5% (-2.3%) mainly at the expense of a seasonal fall of prices for fruits and vegetables. Other components of the consumer price index changed insignificantly,” the expert noted.

But since September, according to her forecast, annual consumer inflation will start speeding up, partially through a low comparative benchmark: prices for foodstuffs were extremely low in autumn 2011 as a result of the record-making yield of agricultural products.

“At the same time, we consider that growth of world prices for grain crops will have a limited impact on the inflation dynamics in Ukraine, since a rather high grain yield is expected in Ukraine to the amount of 44-45 million tons (which is 10% up against the average over 10 years), and carry over stocks of grain at the end of June reached record-making 12 million tons (against 4 million tons a year earlier). Therefore, we preserve our inflation forecast at the end of 2012 at the level of 4.5%,” Bilan stressed.

To remind, the Agrarian Policy and Food Ministry increased its grain export forecast in 2011-2012 marketing year from 24 million tons to 27 million tons (for comparison: export was 12 million tons in 2010-2011 marketing year). Agrarian workers will allow Ukraine to reach growth rates by results of the year, aired by the government (GDP growth by 4.7%).

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