Ukraine CPI slides 0.1% in July

Ukraine’s consumer prices were almost unchanged in July, sliding 0.1% m/m (+7.9% yoy) compared to a 0.2% m/m (+6.9% yoy) rise in the prior month, according to state statistics released on Aug. 8. For 7M16, CPI increased 4.8% YTD. The key factors for the July deflation were falling prices for food (-0.9% m/m) and clothing & footwear (-3.5% m/m). Growth slowed for prices in healthcare (+0.2% m/m vs. +0.3% m/m in June), transportation (+0.4% m/m vs. +1.2% m/m in June) and education (+0.5% m/m vs. +1.1% m/m in June). At the same time, utility rates sped up to +1.7% m/m (+0.1% m/m in June), partially reflecting an increase in heating rates (+8.1% m/m).

Alexander Paraschiy: July CPI is exactly what we estimated. Decreasing m/m food prices is a seasonal trend for the summer months. The strong hryvnia this summer has also contributed to the deflationary trend, particularly in the case of falling prices for clothing and footwear. Still, we expect inflation to speed up starting September on the back of a near 28% increase in electricity rates. By October, doubled heating rates (as of July 1) will begin to affect household budgets, adding extra pressure on consumer prices. Since these tendencies are in line with our expectations, we are keeping our initial CPI forecast unchanged at 10.5% YTD (+14.5% yoy) for 2016.