Ukraine consumer prices increase 1% m/m in January

Ukraine’s consumer prices increased 1.0% m/m in January,
driven mostly by food, housing and utility prices, the State Statistics Service
reported on Feb. 8. Meanwhile, annual inflation slowed to 9.2% yoy from 9.8%
yoy in December.

 

Prices for housing and utilities jumped 2.6% m/m,
driven mostly by price hikes for heating and hot water (11.0% m/m) that were
caused by previously increased residential  natural gas rates.

 

Food prices grew 2.1% m/m in January (vs. 1.8% m/m
growth in December), driven by vegetables (16.6% m/m), fruits (4.7% m/m) and
milk (1.6% m/m). At the same time, prices for eggs slid 0.5% m/m.

 

Amid the growth, accelerated price declines for
clothing and footwear (-4.6% m/m in January vs. -2.6% m/m in December) and
transportation (-1.7 % m/m in January vs. -1.6% m/m in December) served as
restraining factors.

 

Core inflation (the consumer basket excluding goods
and services with the most volatile prices) slowed to 0.3% m/m growth in
January from 0.6% m/m in December. Annual core inflation slowed to 8.3% yoy.

 

Evgeniya Akhtyrko: January
consumer inflation was in line with our expectations. The hryvnia’s
appreciation by 0.5% in December, and mostly stable exchange rate in January,
fostered the decline of prices for items with a high share of imports, namely
clothing, footwear and gasoline.

 

In addition, seasonal sales amid enlarged supply also
contributed to plunging clothing and footwear prices. Meanwhile, growing demand
for food during the holiday season amid tighter supplies caused fruit and
vegetable prices to surge.

 

If January’s cooling annual inflation trend is
maintained in February, the central bank is likely to cut its key policy rate
by 0.5pp in March from 18.0% currently.

 

We expect Ukraine’s consumer inflation to slow to
6.7% YTD in 2019 (from 9.8% YTD in 2018).