Ukraine consumer prices stay flat again in June

Ukraine’s consumer prices remained flat m/m in June
for the second month in a row, the State Statistics Service reported on July 9.
Annual inflation slowed down to 9.9% yoy from 11.7% yoy in May. Like in the
previous month, the disinflation was caused by a drop in prices for food and
clothing.

Food prices dropped 0.5% m/m (after 0.7% m/m decline
in May), mostly due to a seasonal decline in prices for eggs (-9.8% m/m), milk
(-1.7% m/m), fruits (-2.1% m/m) and vegetables (-1.0% m/m). The decline in
prices for clothing and footwear accelerated to 2.4% m/m (from 0.4% m/m decline
in May).

Meanwhile, prices for alcohol and tobacco continued to
rise, adding 1.6% m/m in June (after 1.8% m/m growth in May). Prices for
transportation increased 0.6% m/m, like in the previous month. Utility prices
climbed 0.3% m/m, while prices for household durables inched up 0.2%

Core inflation (the consumer basket excluding goods
and services with the most volatile prices) was flat m/m in June, slowing from
0.2% m/m growth in May. Annual core inflation slowed to 9.0% yoy growth from
9.3% yoy in the previous month.

Evgeniya Akhtyrko: We expected
disinflation to continue after May amid
declining food prices. However, plunging clothing prices have helped a lot in
maintaining a flat trend in overall consumer prices amid creeping inflation in
other consumer price index components.

Deteriorating weather conditions in the second half
of June might result in lower harvests as early as this month, which could
offset anticipated slowing in food price growth. CPI will increase 8.9% YTD, or
11.8% yoy in 2018, according to our projections.