Ukraine CPI decreases 0.4% m/m in February

Ukraine’s consumer prices decreased 0.4% m/m (+32.7% yoy) in February compared to a 0.9% increase (+40.3% yoy) in the prior month, according to data released by UkrStat on March 9. The main factor was food prices, which dropped 0.7% m/m (vs. +2.2% m/m in January). In particular, dairy product prices fell 5.1% m/m, fruit prices declined 2.1% m/m and meat prices dropped 1.3% m/m.

Prices for clothing and footwear decreased 2.0% m/m (-4/4% m/m in January). Growth in education and utility prices slowed to 1.0% m/m and 0.3% m/m respectively, compared to 2.5% m/m and 0.7% m/m in the prior month. At the same time, growth in healthcare and transportation prices accelerated to +1.6% m/m and 0.0% m/m respectively (compared to +1.2% m/m and -0.4% m/m in the prior month). 

Alexander Paraschiy: February deflation is surprising amid hryvnia decline in the first two months of the year. Most likely, an embargo Russia imposed on Ukraine’s food imports was the main reason for the outcome since some oversupply might have been created on the local market. What is more, some abolished import duties might have also been reflected in the prices of imports such as fruits. Apart from that, we do not see any reason for a deflationary trend in the country. Though February CPI was different from our estimates, we are not revising our inflation projections and anticipate CPI increasing 9.5% YTD (16.2% yoy) in 2016.