Ukraine consumer inflation slows to 4.1% in 2019

10 January 2020

Ukraine’s consumer prices declined 0.2% m/m in December from 0.1% m/m growth in November, mostly due to declining prices for clothing and footwear, housing and utilities, and transportation, the State Statistics Service reported on Jan. 9.

 

Annual inflation slowed to 4.1% yoy from 5.1% yoy in November (and 9.8% yoy in 2018).

 

Prices for clothing and footwear dropped 3.4% m/m in December (vs. a 1.4% m/m decline in November). Prices for housing and utilities dropped 2.3% m/m (vs. 2.8% m/m growth in November) mostly due to an 11.2% m/m decline of prices for natural gas. On top of that, transportation prices declined 0.8% m/m due to a 0.8% m/m decline of prices for gasoline.

 

Food prices stayed flat m/m in December (vs. a 0.1% m/m decline in November). In particular, prices for fruits declined 1.2% m/m, prices for sugar dropped 1.4% m/m. At the same time, prices for milk and eggs jumped 1.7% m/m and 0.7% m/m respectively.

 

Core inflation (the consumer basket excluding goods and services with the most volatile prices) declined 0.3% m/m in December (a 0.1% m/m growth in November). Annual core inflation slowed to 3.9% yoy.

 

Evgeniya Akhtyrko: The accelerated appreciation of the national currency by 3.2% in December resulted in disinflation outweighing the traditional increase of consumer activity prior to the holiday season. The appreciation of the exchange rate fostered the decline of prices for items with a high share of imports, namely clothing, footwear, gasoline and fruits. In addition, the decline of global prices for energy resources prompted the government to lower tariffs for natural gas consumed by households.

 

December’s deflation of consumer prices brought annual inflation down to 4.1% yoy. This means that consumer inflation now is at the lower end of the mid-term consumer inflation target range set by the National Bank of Ukraine (NBU). This result calls for an accelerated softening of NBU’s monetary policy revision, as the current key policy rate of 13.5% is too high for the current economic situation. That said, we are likely to see a significant revision in the forecast of key policy rate, which should be published by the NBU next week.

 

We expect Ukraine’s consumer inflation in 2020 to stay in the central bank’s mid-term target range of 4-5% yoy.