Ukraine consumer inflation speeds up to 6.1% in January

Annual inflation in Ukraine sped up to 6.1% yoy in
January from 5.0% yoy in December, the State
Statistics Service reported on Feb. 9. Ukraine’s consumer prices jumped 1.3%
m/m in January after increasing 0.9% m/m in December mostly due to growing
prices for food, housing and utility services.

Food prices advanced 1.4% m/m in January (after
increasing 1.7% m/m in December). Prices grew the most for eggs (15.4% m/m),
vegetables (6.5% m/m), and sugar (3.6% m/m). Alcohol and tobacco added 1.0% m/m
in January.

Housing and utility services jumped 6.0% m/m (after
inching up 0.1% m/m in December). In particular, prices for electricity surged
36.6% m/m, prices for water supply advanced 10.9% m/m. Prices for
transportation grew 1.0% m/m in December, mostly due to fuel and lubricants
(+2.3% m/m).

At the same time, prices for clothing and footwear
dropped 4.0% m/m (after falling 4.6% m/m in December).

Evgeniya Akhtyrko: As we expected, consumer
inflation sped up further in January. Food prices are heated up by high
consumer demand amid the fast growth of population’s income. The hike of the
minimum wage to UAH 6,000 apparently served as an additional factor. Moreover,
the disbalances in supply of some staple foods often result in their huge price
fluctuations.

The surge in some utility prices contributed
significantly to consumer inflation in January. In particular, the government
cancelled the privileged electricity tariff for the first 100 kWh consumed by
households per month.

Now, annual consumer inflation exceeds the upper bound
of the central bank’s inflation target range of 4-6%. And we expect the
consumer inflation to spiral up in the nearest months, going beyond 7% yoy.
That said, the National Bank of Ukraine is likely to hike the key policy rate
by up to 100 bps from current 6%.