CPI slows to 1.9% yoy in March

Ukraine’s consumer price index decelerated to 1.9% yoy in March (vs. 3.0% in February), the slowest pace since January 2003, but grew slightly in month-on-month terms to 0.3% (vs. 0.2% mom in February), according to UkrStat. Prices for food (50% of the consumer basket) declined 2.1% yoy (vs. -0.5% in February), continuing to enjoy the boost from last year’s abundant harvest. Prices for transportation and fuel, the fastest growing CPI component this year, also slowed to 12.3% yoy (vs. 15.6% yoy in February).

Svetlana Rekrut: Low CPI remains one of the few bright spots for Ukraine amid overall economic weakness this year, supporting robust real salary growth (+15.3% yoy in 2M11) and high private consumption (retail turnover was 13.2% yoy in 2M12). We see a high chance of CPI slowing further in April-May given the high comparison base, but expect the trend to reverse in 2H12 with food and fuel prices the main growth drivers. We project CPI to increase 9.1% yoy at end-2012 but note risk to our projection are to the downside (as the government does not plan to revise household tariffs).