Ukraine consumer inflation speeds up to 8.5% in March

Annual inflation in Ukraine sped up to 8.5% yoy in
March from 7.5% yoy in February the State
Statistics Service reported on April 9. Ukraine’s consumer prices jumped 1.7%
m/m in March after increasing 1.7% m/m in February mostly due to growing prices
for food, transportation as well as clothing and footwear.

Food prices advanced 2.1% m/m in March (the same
increase as in February). Prices grew the most for vegetable oil (9.7% m/m),
sugar (4.8% m/m) and fruits (3.5% m/m). Alcohol and tobacco added 1.3% m/m in
February (vs. 1.0% m/m growth in January).

Prices for clothing and footwear surged 12.7% m/m
(after falling 3.5% m/m in February). Prices for transportation grew 1.8% m/m
in March (after increasing 1.7% in January), mostly due to jumps in the cost of
fuel and lubricants (+5.7% m/m) and railroad tariffs (+4.4% m/m).

Prices for housing and utility services remained flat
in March (after declining 1.8% m/m in February).

Evgeniya Akhtyrko: Monthly
inflation in March was higher than in the three previous years. It looks like
unleashed food prices turned the consumer inflation to a self-sustaining phase.
A surge in prices for clothing and footwear is hard to explain as the demand
for non-food retail items remains weak amid lowered consumer activity during
the pandemic era. Possibly, the non-food retailers just pulled up their prices
as a result of a bandwagon effect amid other fast growing consumer prices.

The substantial acceleration of consumer inflation is
likely to prompt the National Bank of Ukraine to hike its policy rate at its
April 15 meeting by at least 1 pp from 6.5% today.

A spike of consumer inflation in February and March
exceeded our expectations, thus making our forecast of consumer inflation in
2021 of 7.2% YTD hardly attainable. Now, we don’t see much chance for consumer
inflation to go below 8% yoy in 2021.