Page 25 - UKRRptJun19

4.2 Inflation
Prices 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F
CPI headline (%YoY, 16.6 22.3 12.3 9.1 4.6 -0.2 0.5 24.9 43.3 12.4 13.7 9.4 eop)
CPI headline (%YoY, 12.8 25.3 16 9.4 8 0.6 -0.3 12.1 48.5 14.9 14.5 9.2 average)
PPI (%YoY, eop) 23.2 21.1 15.3 18.8 17.4 0.4 1.7 31.8 25.4 35.7 16.5 9
PPI (%YoY, average) 20.5 33.6 7.4 21.4 19.9 6 -0.1 17 36.5 20.4 27.2 10.6
Source: ICU, CEIC
4.2.1 CPI dynamics
Ukraine’s consumer inflation accelerated to 1.0% m/m growth in April
after rising 0.9% m/m in March, driven mostly by prices for food and clothing, the State Statistics Service reported on May 8. Annual inflation accelerated to 8.8% y/y from 8.6% y/y in March.
Food prices grew 1.4% m/m in April (vs. 0.4% m/m growth in March), driven by vegetables (12.6% m/m), meat (1.2% m/m) and bread (0.8% m/m). At the same time, egg prices declined 11.1% m/m, fruit prices dropped 1.0% m/m, sugar prices sild 0.5%.
Clothing and footwear prices increased 1.9 m/m after surging 11.3% m/m in March. In addition, prices for transportation rose 1.0% m/m (after staying flat in previous month) mostly due to growth in the prices for gasoline.
Core inflation (the consumer basket excluding goods and services with the most volatile prices) slowed to 0.4% m/m growth in April from 1.4% m/m in March. Annual core inflation slowed to 7.4% y/y from 7.6% y/y in March.
April’s surge in vegetable prices was mostly due to a seasonal decline in which goods from the prior year's harvest runs out while the offerings of the new harvest are weak. Nevertheless, such a situation points to the overall weakness of Ukraine’s economy when seasonal problems in the supply of one item can cause significant price fluctuations, resulting in accelerated inflation.
The acceleration of annual inflation in April is likely to affect the plans of Ukraine’s central bank on softening monetary policy. Most likely, the National Bank of Ukraine (NBU) will abstain from lowering its key policy rate until it observes a consistent declining inflation trend in three-to-four consecutive months. The attainability of the NBU’s forecast with consumer inflation of 6.3% YTD in 2019 is now in question as well. Only significant disinflation in May- August might help to achieve this goal.
25 UKRAINE Country Report June 2019 www.intellinews.com