Affects everyone: what is inflation and how it affects our spending

In May, annual inflation accelerated to 18%. This has had a direct impact on Ukrainians’ spending, as the prices of many goods have risen and they have to pay more.

“Today” explains what the term “inflation” means, why it is accelerating and how it is calculated.

What is inflation

In short, this rising prices for products and services. In other words, inflation is an indicator by which we understand how prices and tariffs for consumer goods and services have changed over time.

In turn, inflation reduces the purchasing power of money. That is, in order to purchase the same product, we have to spend large sums.

At the same time, this is an average if inflation accelerated to 18% in May 2022, this does not mean that all goods have risen in price. As we already wrote, in May buckwheat, rice and some vegetables went up in price, and, for example, meat and eggs, on the contrary, fell in price. They can also significantly reduce the cost of some services, which will pull the overall figure down.

Who and how calculates inflation

As explained in the National Bank, this indicator is calculated by the State Statistics Service. There is an approved a list of certain goods and services most often used by Ukrainians, and the service calculates the change in prices for them. The list is updated occasionally and includes about 355 titles, including the following:

• products;
• clothing and footwear;
• housing fee;
• maintenance and repair of housing;
• household items;
• Appliances;
• health care services;
• transport, tourism, money services;
• expenses for education, fuel and lubricants, etc.

What causes inflation to rise

The main factors of price growth in the NBU are:

• disruption of supply chains;
• increase in business costs;
• the physical destruction of enterprise assets due to a full-scale war between Russia and Ukraine;
• uneven demand and supply of goods across regions.

At the same time, each category of goods may have its own reasons for the rise in price. In the NBU commentary on inflation in May, they explained that the price of oil, for example, slowed down growth due to limited export opportunities, and the price of meat has gone down reduction of sales markets and cheaper raw materials.

“The cost of housing repair services has increased due to the partial restoration of housing construction and the need to restore housing in the de-occupied territories, as well as due to the continued shortage of some consumables. Under the influence of the recovery in demand, the services of beauty salons, cinemas, sports facilities and catering establishments have risen in price faster. Also increased the cost of taxi services due to the rise in price of fuel and its shortage”, the controller explained.

Price for salt grew up because destruction of the main mining enterprise and limited imports.

At the same time, the NBU added that there are still a lot of risks for inflation, especially against the background of the fact that Russia is destroying food warehouses, trading establishments, blocking ports and damaging transport infrastructure.

The Russians again attacked the refinery, what will happen to gasoline

As we said earlier, on June 18-19, the invaders once again fired at some oil refineries and tank farms in Ukraine. And these shellings are one of the reasons why the gasoline crisis continues in the country.

According to the director of the A-95 consulting group, Sergei Kuyun, it makes no sense to predict when there will be enough fuel, and there is no point in restoring refineries or building new ones, because the war is still going on, and the risks that the Russians will hit these facilities again are still high.

At the same time, fuel supplies to Ukraine are increasing, although sometimes this is not noticed. Therefore, drivers should save. If drivers without special needs reduce fuel consumption, this will at least allow get the resource to those who really need it. And as a maximum, it will allow the state create stock and reduce imports.

“Today” used to talk about who delays the supply of gasoline to Ukraine, and what is happening with the fuel in neighboring Poland.