Ukraine consumer prices jump 0.8% in September

10 October 2019

Ukraine’s consumer prices jumped 0.8% m/m in September owing to growing prices for food, clothing, and footwear and education, the State Statistics Service reported on Oct. 9. Annual inflation slowed to 7.5% yoy in September from 8.8% yoy in August.


Food prices increased 0.3% m/m in September (vs. a 0.3% m/m decline in August), driven mostly by bread (1.1% m/m), fruits (2.4% m/m) and milk (1.7% m/m). At the same time, prices for eggs declined 6.3% m/m, vegetables fell 5.1% m/m, and sugar slid 1.0% m/m.


Prices for clothing and footwear surged 8.7% m/m (after a 2.8% m/m decline in August). In addition, prices for education jumped 9.9% m/m.


At the same time, prices for utilities and house maintenance dropped 0.2% m/m (vs. a 0.9% m/m decline in August) driven by lower natural gas prices for households (-3.0% m/m). In addition, transportation prices slid 0.4% (vs. a 0.6% m/m decline in August) due to falling prices for gasoline and railroad transit.


Core inflation (the consumer basket excluding goods and services with the most volatile prices) jumped 1.2% m/m in September (vs. a 0.1% m/m decline in August). Annual core inflation slowed to 6.5% yoy from 7.2% yoy in August.


Evgeniya Akhtyrko: September’s jump in consumer prices was in line with our forecast. Food prices started growing in autumn due to tighter supply. The jump of prices for clothing and footwear is connected to the seasonal change of retailers’ stocks for more expensive warm items.


Nevertheless, the slowdown of annual inflation to 7.5% yoy in September is a significant achievement. Importantly, this indicator is lower than the National Bank's forecast of 7.7% yoy at the end of 3Q19. This means that the NBU has a very strong argument for continuing its monetary softening cycle and a further cut of its key policy interest rate during the next monetary policy board meeting on Oct. 24.


While making its decision, the NBU will need to find a trade-off between a comforting trend of cooling inflation and growing risks related to uncertainty with an IMF decision on a new loan deal with Ukraine.


We forecast that consumer prices will increase 6.5% YTD in 2019 (vs. 9.8% YTD in 2018).

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