Consumer prices abate 1.2% yoy in June

Ukraine’s consumer prices declined 0.3% mom and 1.2% yoy in June, UkrStat reported last week. Food remained the key deflation driver, with prices falling 0.7% mom and 6.4% yoy.

Vitaliy Vavryshchuk: June is the second straight month of deflation and we expect CPI will remain in negative territory until August. However, we see prices accelerating further on and end-2012 CPI reaching 5.9% on an expected substantial decline in the grain harvest this year due to persisting droughts. Additionally, we do not rule out that the government will decide to revise utility tariffs up after the parliamentary election scheduled for October. Deflation/low CPI should support strong growth in household real incomes and consumption, which is set to remain the key GDP growth driver in 2012.