Ukraine CPI surges 14.0% m/m in April

Ukraine’s consumer prices accelerated 14.0% m/m (60.9% yoy) in April from 10.8% m/m (45.8% yoy) in the prior month, owing to surging utility rates (+109.7% m/m), according to state statistics released on May 6. At the same time, price growth slowed in food (+4.4% m/m, vs. +15.6% m/m in March), healthcare (+4.0% m/m, +9.7% m/m in March), education (+1.8% m/m, +2.0% m/m in March) and transportation (+4.3% m/m, +7.4% m/m in March).

Alexander Paraschiy: The April upsurge was much stronger than we expected. The hryvnia’s stability at UAH 22.6/USD on average, compared to UAH 23.1/USD in March, should have promised almost flat prices. And we also foresaw increasing utility rates rising as of April 1, though the overall effect should not have pushed CPI higher than 4% m/m, given that the weight of gas is only 2.1% in CPI, electricity is 1.6% and heating is 1.8%. Therefore, by our estimates, the price of natural gas jumped 3x (for gas consumed below 200 cm per month), heating accelerated 72% (for residents with heating meters) and electricity rose 19% (for electricity consumed below 100 kWh per month).

And yet figures from the State Statistics Committee differed, having restricted its gas estimate to rates charged for multi-family residences. As a result, gas rates were estimated 5.5x higher compared to the previous month, heating rates were reported to have decreased 0.1% m/m and electricity was estimated to have surged 33.6% m/m.  Naturally, a 5.5x jump in gas rates would significantly inflate the CPI, even if still had a relatively low weight on the index. 

At this stage, we still expect UkrStat to make some adjustments to its numbers presented in April. Nonethless, we see a high risk that our earlier annual CPI forecast of 34.3% yoy (25.8% YTD) could be too conservative.