Ukraine’s Inflation Slowed to 8.2%: Why Prices Still Pressure Businesses and Consumers
In May 2026, overall inflation in Ukraine decreased to 8.2% year-on-year. Formally, this is a positive signal: the pace of price growth has become lower. But the reason for the slowdown is mainly seasonal there were more certain raw food products on the market, so inflation in this segment fell to 4.6% y/y. This does not mean that price pressure in the economy has disappeared. On the contrary, core inflation in May accelerated to 7.9% y/y and continued to grow in June. This indicator better reflects stable price processes, because it does not depend so strongly on seasonal fluctuations in vegetables, fruits, or other raw products.
Time for Action analyzed why the overall slowdown in inflation does not mean quick relief for consumers and businesses.
The main risk is the increase in companies’ costs. Businesses are paying more for wages, energy resources, and logistics. Added to this are the consequences of the previous weakening of the hryvnia. All of this gradually moves into final prices for buyers. That is why processed food products are becoming more expensive. In May, inflation in this segment accelerated to 10.4% y/y. Unlike raw products, their price depends not only on the harvest or seasonal supply. The cost of processed goods already includes production, electricity, packaging, transportation, wages, rent, and the work of retail chains. Even stronger pressure is visible in the services sector. They became 13.6% y/y more expensive. This is connected not only with business costs, but also with the shortage of workers. When qualified personnel are lacking, employers have to raise wages, and these costs are then reflected in prices. A separate factor is administrative inflation. In May, it rose to 10.2% y/y. The reasons were higher public transport fares in Lviv, Dnipro, Mykolaiv, Zaporizhzhia, and Kryvyi Rih, as well as a change in the excise coefficient on tobacco.
Fuel prices in May were 38.7% higher than a year earlier. But this indicator is partly explained by a low comparison base. Already in June, fuel began to become cheaper due to a decline in global oil prices. For the economy, this is important because fuel affects transport, delivery, the agricultural sector, trade, and production. Economic activity remains uneven. In June, business expectations worsened because of the shortage of personnel and Russian attacks on business facilities. Registration of new sole proprietors slowed, although the number of new companies continued to grow. At the same time, some sectors showed revival. Retail turnover increased by 10.9% in May and by 19.1% in June, according to cash register data. Demand was supported by electronics and pharmaceuticals. This means that consumer activity remains, but it is concentrated in specific categories of goods. In transport, after a May decline in freight transportation by 16.3%, activity increased in June thanks to the export of last year’s grain stocks. Industry also had positive signals: metallurgy returned to last year’s level due to the stabilization of energy supply, while gas production increased. At the same time, the food industry was restrained by a decline in sunflower oil production due to low profitability and a shortage of raw materials. This shows that recovery in different sectors is uneven: some industries are supported by demand or more stable energy supply, while others remain under pressure from costs and raw material problems. The labor market situation in June was also mixed. The supply of workers increased by 28% y/y, while demand from employers grew by only 4% y/y. But the shortage of qualified personnel remains. This means that the number of people looking for work is growing, but businesses still lack the right specialists.
Because of the personnel shortage and higher payments in the public sector, the average nominal wage in May approached UAH 31,000. For workers, this is a positive signal, but for businesses, it is an additional cost factor. If wages grow faster than productivity, companies often transfer part of the costs into prices. The financial situation largely depends on international support. In May, the current account deficit decreased to $3.7 billion thanks to lower imports of energy resources and agricultural goods, as well as a grant from the United States. At the end of spring, reserves temporarily decreased to $45.7 billion because of restrained volumes of assistance. But in June, Ukraine received more than $15 billion in international financing. This made it possible to increase reserves again and expand state budget expenditures on defense, social programs, and recovery. It is notable that grants in June accounted for 47% of all budget revenues. This emphasizes how important external assistance remains for public finances. It supports the budget, reserves, and the ability to finance key needs without excessive pressure on the domestic market. In June, the NBU kept the key policy rate at 15%. This supported public interest in hryvnia savings. The volume of term deposits in hryvnia increased by UAH 6 billion, while the average daily portfolio of hryvnia domestic government bonds owned by individuals rose by UAH 2.6 billion. For financial stability, this is important. When people keep funds in hryvnia deposits and bonds, this reduces additional demand for foreign currency and supports the domestic borrowing market. But a high rate also has the opposite side: it makes loans more expensive for businesses and households.
Іnflation in Ukraine has slowed, but it has not become safe for the economy. Seasonal cheapening of raw food products improved the overall indicator, but core inflation, services, processed products, business costs, and the personnel shortage remain sources of pressure. The economy continues to work and adapt, but its recovery is uneven. Trade, transport, and part of industry have positive signals. At the same time, businesses face a shortage of personnel, attacks on facilities, high costs, and the budget’s dependence on international financing. The May slowdown in inflation should be treated cautiously: the overall figure has improved, but stable price pressure remains one of the main challenges for Ukraine.
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