Ukraine consumer inflation hits 10% in 2021

Ukraine’s consumer prices increased 0.6% m/m in
December after jumping 0.8% m/m in November, mostly due to increases in prices for
food, the State Statistics Service reported on Jan. 10.

Annual inflation slowed to 10.0% yoy from 10.3% yoy in
November (and sped up from 5.0% in 2020).

Food prices advanced 1.2% m/m in December (after
increasing 1.1% m/m in November). Prices grew the most for eggs (10.0% m/m),
vegetables (9.1% m/m), and milk (3.0%). At the same time, prices declined for
fruits (-3.9% m/m), sugar (-2.1% m/m) and sunflower oil (-1.4% m/m). Prices for
alcohol and tobacco added 0.2% m/m in December.

Prices for clothing and footwear dropped 3.6% m/m
(after falling 2.1% m/m in November). Prices for housing slid 0.1% m/m amid a
0.7% m/m decline for natural gas prices. In addition, prices for transportation
dropped 0.2% (after picking up 1.2% m/m in November), as the decline of prices
for fuel and lubricants (-3.0% m/m) outweighed the increased passenger fares
(1.1% m/m).

Evgeniya Akhtyrko: The decline
of prices for clothing, housing and transportation helped to moderate inflation
in December. However, food inflation shows no signs of calming down, as
consumer demand stays high.

Importantly, the deflation of some consumer basket
items in December was momentary. The decline in tariffs for households’ natural
gas was the result of governmental regulatory tricks, while the drop in fuel
prices followed the temporary price decline for oil at global markets.

We don’t expect consumer inflation to enter the
National Bank’s inflation target range of 4-6% yoy by the end of this year.
High consumer demand, coupled with the slow correction of global commodity
prices, will keep inflation in a stubbornly self-sustaining mode. In 2022,
consumer inflation will reach 7.5% YTD, we forecast.