Ukraine consumer inflation speeds up to 2.4% yoy in June

Ukraine’s consumer inflation accelerated to 2.4% yoy
in June from 1.7% yoy in the prior month, the State Statistics Service reported
on July 9. Consumer prices increased 0.2% m/m in June (vs. 0.3% m/m in May),
mostly driven by food, alcohol and tobacco, as well as transportation prices.

Food prices rose 0.4% m/m in June (after climbing 1.2%
m/m in May). In particular, prices jumped for fruits (8.4% m/m), bread (0.6%
m/m) and butter (0.7% m/m). In addition, prices for alcohol and tobacco climbed
0.5% m/m. At the same time, prices for vegetables declined 4.7% m/m, and prices
for both milk and sugar slid 1.3% m/m.

Prices for transportation jumped 1.2% m/m in June (vs.
a 2.0% m/m decline in May), driven by increasing prices for fuel and lubricants
and growing prices for railroad transportation.

Meanwhile, prices for clothing and footwear declined
2.8% m/m (after falling 1.4% m/m in May). Prices for housing and utilities
continued to slide, losing 0.4% m/m (vs. a 2.8% m/m decline in May) due to a
plunge in natural gas prices by 4.3% m/m.

Evgeniya Akhtyrko: Annual
consumer inflation accelerated in the absence of usual disinflation in
June.  Meanwhile, we believe that June’s inflation was supply-driven
rather than resulting from increased consumer activity. In particular, food
suppliers have been hit by chain disruptions, which emerged as a result of
quarantine/lockdown restrictions in March-May.

In addition, some operators are trying to compensate
their losses from previous months by raising their prices. The drop in prices
for clothing and footwear was likely the result of sluggish consumer demand, as
well as a 0.4% monthly hryvnia appreciation, which affected the pricing of
imported items.

We expect consumer inflation will accelerate to
6.0% YTD in 2020 (vs. 4.1% YTD in 2019).