Ukraine consumer inflation jumps to three-year maximum in July

Annual inflation in Ukraine accelerated to 10.2% in
July from 9.5% yoy in the previous month, the State Statistics Service reported
on Aug. 9. Ukraine’s consumer prices inched up 0.1% m/m in July after
increasing 0.2% m/m in June. Annual inflation reached a three-year maximum in
July.

Food prices slid 0.1% m/m in July after declining 0.2%
m/m in June. The decline was due to lower prices for fruits and vegetables
(-0.5% m/m and -8.1% m/m, respectively) as well as sunflower oil (-0.7%
m/m).  At the same time, prices for sugar jumped 6.7% m/m, meat prices
jumped 0.8% m/m, and prices for butter increased 0.6%.

Prices for clothing and footwear dropped 5.2% m/m
after sliding 2.8% m/m in June. At the same time, prices for transportation
grew 1.1% m/m in July (after increasing 1.0% in June), driven by higher prices
for fuel and lubricants as well as increased fares for railroad and automobile
passenger transportation. In addition, prices for alcohol and tobacco increased
0.8% m/m.

Prices for housing and utility services increased up
0.6% m/m (after inching up 0.4% m/m in June), driven by a 3.3% m/m jump in
prices for natural gas as well as increased prices for housing maintenance.

Evgeniya Akhtyrko:  The
seasonal decline of food prices turned out to be very weak this year. Likely,
mounting consumer demand easily accommodated the seasonal increase of the food
supply. In addition, the continued growth of prices for transportation as well
as housing services shaved off the decline of food and clothing prices.

With such an inflation increase in July, the NBU is
likely to consider another 0.5pp hike of the key policy rate from the current 8.0% at its next monetary committee meeting on Sept. 8,
especially if the inflation results in August will be no better than those in
July. We expect consumer inflation to reach 9.5% YTD in 2021 (vs. 5.0% YTD in
2020).