Page 21 - UKRRptMay21

phase,” Evgeniya Akhtyrko of Concorde Capital said in a note. “A surge in prices for clothing and footwear is hard to explain as the demand for non-food retail items remains weak amid lowered consumer activity during the pandemic era. Possibly, the non-food retailers just pulled up their prices as a result of a bandwagon effect amid other fast growing consumer prices.”
Food prices advanced 2.1% m/m in March (the same increase as in February). Prices grew the most for vegetable oil (9.7% m/m), sugar (4.8% m/m) and fruits (3.5% m/m). Alcohol and tobacco added 1.3% m/m in February (vs. 1.0% m/m growth in January).
Prices for clothing and footwear surged 12.7% m/m (after falling 3.5% m/m in February). Prices for transportation grew 1.8% m/m in March (after increasing 1.7% in January), mostly due to jumps in the cost of fuel and lubricants (+5.7% m/m) and railroad tariffs (+4.4% m/m).
Prices for housing and utility services remained flat in March (after declining 1.8% m/m in February).
The substantial acceleration of consumer inflation is likely to prompt the National Bank of Ukraine to hike its policy rate at its April 15 meeting by at least 1 pp from 6.5% today.
“A spike of consumer inflation in February and March exceeded our expectations, thus making our forecast of consumer inflation in 2021 of 7.2% YTD hardly attainable. Now, we don’t see much chance for consumer inflation to go below 8% y/y in 2021,” Akhtyrko added.
4.2.1 CPI dynamics
In March of 2021, consumer inflation accelerated to 8.5% y/y (up from 7.5% y/y in February).
In monthly terms, prices grew by 1.7%. This is according to data published by the State Statistics Service of Ukraine. Actual consumer inflation came out higher than had been projected in the January 2021 Inflation Report. Inflationary pressures were generated by the rise in prices for certain foods and fuels and sustained consumer demand. However, inflation was somewhat constrained by a price ceiling for natural gas.
Core inflation accelerated (to 5.9% y/y from 5.6% y/y in February).
Price increases for processed food products sped up (to 8.7% y/y), driven primarily by higher global prices for certain foods. In particular, sunflower oil continued to sharply rise in price. Rising costs of raw materials and energy led to higher prices for mayonnaise, margarine, spread, bread, and flour products. Sustained consumer demand and higher production costs drove higher the prices of butter, sweets, and dairy and meat products. Fish products, dried fruits, and nonalcoholic beverages also increased in price. The growth in services prices accelerated (to 7.3% y/y), underpinned by consumer demand, which remained strong despite tighter quarantine measures in some regions and higher production costs. Specifically, the services of cafes and restaurants, dry cleaners, and beauty salons became more expensive, as did cinema tickets. Prices for driving lessons and taxi rides continued to go up as demand
21 UKRAINE Country Report May 2021 www.intellinews.com