Ukraine Retail Trade Grows, but Production Turns Weaker

The Ukrainian economy seems still trying to find its footing. Data reported today by the National Bank indicate continuing good gains in retail trade and continuing improvement in unemployment. But previous information shows that inflation remains well in double digits and industrial sector growth has slowed markedly so far this year.

Retail trade turnover gained 21.1% in constant prices in June from a year ago, slightly faster than in May and about the same pace as prevailed during 2004. The unemployment rate looks attractive at just 3.0%. This is down 0.5% from a year ago and compares with a peak in June and August 2000 of 4.3%. Thus, some conditions in the economy are clearly showing good health.

At the same time, industrial production, which had expanded 15.8% and 12.5% in 2003 and 2004, respectively, is growing much more slowly this year. Through May, it was up just 6.2% from May 2004, with progressively diminishing year-on-year growth rates each month. But prices continue to rise rapidly. The June CPI is up 14.4% from a year ago; the acceleration began about the middle of last year, and we'd surmise that energy costs were a contributor. The inflationary tendency is indicated in money growth that runs in the upper 30% range over a year ago. Thus, while there is strong real growth in such as retail trade, the accompanying inflation clouds the economic atmosphere, along with persistent political uncertainties.