Fuel, higher transport fares, clothing, and footwear drove prices up in March, as the war in the Middle East pushed oil prices higher and made imports more expensive through rising transportation costs.
Fuel prices have already increased by 23.4% compared to the same period last year, as Ukraine’s economy faces enormous pressure – much like other countries feeling the economic consequences of the Middle East war.
The annual inflation rate in March rose to 7.9% compared with the same period last year, Ukraine’s State Statistics Service reported on Tuesday. Consumer inflation was 7.6% year-over-year the previous month, according to the statistics report.
Core inflation – an indicator of price pressures excluding highly volatile items – rose to 7.1% year-over-year, a 0.1 percentage point uptick in annual terms, according to the State Statistics Service.
But while the overall inflation rate shows only a minor change, monthly figures and comparisons across different price categories reveal that Ukraine’s prices remain under pressure.
How the war in the Middle East drove up logistics and fuel prices in Ukraine
In March, transportation prices rose by 6.4%, mainly due to a 13.2% increase in the cost of fuel and lubricants, along with increases of 8.2% and 6.0% in rail and road passenger fares, respectively. Ukraine has not seen such a monthly jump in the transport category in a year – monthly increases had previously ranged from -0.3% to 1.6%.
Annual figures show an even steeper spike. A surge in fuel prices amid the Middle East war and soaring global crude prices drove up transportation costs across the board, Ukraine’s central bank, the National Bank of Ukraine, noted in its commentary on the latest inflation figures.
“Extra energy costs for gas and electricity pushed up prices for a broad range of goods and services. So far, price increases have remained contained as high competition for consumer demand remained. But continued high energy costs may lead to higher inflation expectations and second-round effects on inflation,” Vitaliy Kravchuk, Senior researcher at The Institute for Economic Research and Policy Consulting (IER), told Kyiv Post.
Grocery prices falling after a year of increases
The annual rate of food price growth also slowed to 8.4% year-over-year – the first slowdown for raw food products since the beginning of the year, Ukraine’s central bank noted.
Eggs saw the largest price increase, 7.7%, but this is due to the comparison effect of higher prices from a year ago.
Prices for grain products, sunflower oil, fruits, bread, fish and fish products, beef, vegetables, non-alcoholic beverages, and lard rose by 0.8-4.8%. Prices for sugar, pasta, rice, pork, poultry, and butter fell by 0.1-1.0%.
“Price increases for pork and chicken slowed further as the supply of imported products expanded. Prices for borshch vegetables remained at less than half last year’s levels due to active sales of stocks from storage facilities unequipped for warm weather,” the NBU reported.
Clothing prices rose by 12.0% and footwear by 11.8%. Prices for alcoholic beverages and tobacco products increased by 1.1%, driven by a 1.3% rise in tobacco prices.
In the telecommunications sector, prices rose by 2.5%, driven mainly by a 3.8% increase in mobile phone rates.