Ukraine CPI slows to 2.2% m/m in May

Ukraine’s consumer price growth slowed to 2.2% m/m (58.4% yoy) in May from 14.0% m/m (60.9% yoy) in the prior month, according to state statistics released on June 5. All key CPI components slowed except for transportation prices. Growth in utility rates slowed to 1.2% m/m (vs. +109.7% m/m in April), healthcare prices to 1.4% m/m (+4.0% m/m), education prices to 1.5% m/m (+1.8% m/m) and food prices to +3.1% m/m (+4.4% m/m). Rising fuel costs pushed transportation prices higher by 0.2% m/m compared to a 4.3% m/m decline in April.

Alexander Paraschiy: May inflation was perfectly in line with our forecast of a significant slowdown after the hryvnia stabilized and utility rates remained unchanged compared to the previous month. From this point onward, we do not anticipate many surprises with inflation, assuming only modest weakening of the national currency till the year end. At the same time, we expect accelerated utility rates starting October when the heating season starts and new heating rates take effect.

All in all, we see that this year’s major inflation potential was exhausted last month and we expect no significant CPI growth in the nearest future. Nevertheless, we are upgrading Ukraine’s 2015 inflation forecast to 49.1% yoy (42.9% YTD).