Ukraine consumer prices rise 0.9% m/m in March

Ukraine’s consumer inflation accelerated to 0.9% m/m in
March from 0.5% m/m in February, driven mostly by the growth of prices for
clothing and footwear, the State Statistics Service reported on Apr. 9. Annual
inflation slowed to 8.6% yoy from 8.9% yoy in February.

Clothing and footwear prices jumped 11.3% m/m after
declining in the four previous months. Meanwhile, annual inflation for clothing
and footwear was only 2.0% yoy.

Food prices grew 0.4% m/m in March (vs. 0.9% m/m
growth in February), driven by vegetables (2.4% m/m), fruits (1.7% m/m) and
bread (0.9% m/m). At the same time, egg prices dropped 5.0% m/m, and milk
prices slid 0.6% m/m.

Prices for housing and utilities rose 0.3% m/m, driven
mostly by price hikes for water and sewage expenses (1.9% m/m). In addition,
transportation prices rose 0.5% m/m.

Core inflation (the consumer basket excluding goods
and services with the most volatile prices) accelerated to 1.2% m/m growth in
March from 0.2% m/m in February. Annual core inflation slowed to 7.6% yoy from
7.8% yoy in February.

Evgeniya Akhtyrko: The monthly
jump in prices for clothing and footwear in March is typical in Ukraine (9.6%
m/m in March 2018), related to seasonal changes in wardrobe. However, this
year’s jump turned out unexpectedly high considering the hryvnia’s 1.1%
appreciation in March should have offset rising prices for clothing and
footwear in light of the high share of imports.

The annual inflation of 8.6% yoy exceeded the
quarterly forecast by the National Bank of Ukraine of 8.4% yoy. This fact,
coupled with increased political risks related to the presidential elections,
is likely to undermine the central bank’s intention to lower its key policy
rate from 18.0% at its monetary committee meeting on Apr. 24.

We expect Ukraine’s consumer inflation to slow to 6.7%
YTD in 2019 (from 9.8% YTD in 2018).