Ukraine CPI decelerates to 0.6% yoy in April

Ukraine’s consumer prices remained flat mom in April, pushing the consumer price index to 0.6% yoy in April (vs. 1.9% in March), a new multi-year low. In line with previous periods, prices for food were the key driver behind the deceleration in inflation – they declined 0.3% mom and 3.9% yoy in April, likely still benefitting from last year’s plentiful harvest. Utility tariffs were down 0.5% mom and added a mere 2.3% yoy as the government abstains from revising administratively regulated prices ahead of the October parliamentary elections. Prices for gasoline rose the most last month (+5.1% mom and +11.9% yoy) and might have some lagged effect on other CPI components.

Vitaliy Vavryshchuk: We revise our end-2012 CPI projection to 5.9% from 9.1% previously as the government has made it clear it will not revise gas and heating tariffs for households until end-2012. Also, hefty stocks of agricultural produce from 2011 seem to be having a much more pronounced positive effect on prices than we previously expected. We think the key benefit of low consumer inflation is that it supports strong growth in real household incomes, which bodes well for strong domestic demand. We expect new NBU initiatives to soften monetary policy and stimulate more active lending by banks.