Ukraine CPI drops 1.3% m/m in October

October consumer prices declined in Ukraine 1.3% m/m (+46.4% yoy) compared to a 2.3% m/m rise in the prior month, weighed down by a slump in utility rates (-13.8% m/m). Sectors showing slowing price growth include food (+1.1% m/m compared to +1.2% m/m in September), clothing and footwear (+3.6% m/m compared to +18.3% m/m in September), and education (+0.5% m/m to +6.9% m/m in September). Healthcare prices were unchanged at +0.5% m/m growth. At the same time, declines in transportation costs narrowed to -0.6% m/m compared to -1.6% m/m in September.

Alexander Paraschiy: The October deflation was a surprise, with the main source being accounting for natural gas. Households began paying for heat in October at a 39.9% m/m increase.  At the same time, the official statistics took into account a scheduled temporary (till May 2016) reduction in gas prices (by -32.6% m/m) for those consumers that use natural gas for individual heating. Nonetheless, utility rates fell as a whole despite natural gas being weighted equally as heating rates, which rose significantly. The October CPI will serve as a drag on year-end inflation, which we now expect to be slightly lower than 45.5% YTD as previously predicted. In yoy terms, our forecast remains unchanged at 49.1% yoy growth in 2015.