Ukraine consumer inflation speeds up to 7.5% in February

Annual inflation in
Ukraine sped up to 7.5% yoy in February from 6.1% yoy in January, the State Statistics Service reported
on March 9.

Ukraine’s consumer
prices increased 1.0% m/m in February after jumping 1.3% m/m in January mostly
due to growing prices for food, transportation, alcohol and tobacco. Food
prices advanced 2.1% m/m in February (after increasing 1.4% m/m in January).
Prices grew the most for vegetable oil (7.6% m/m), vegetables (6.3% m/m), and
sugar (5.5% m/m). Alcohol and tobacco added 1.3% m/m in February (vs. 1.0% m/m
growth in January).

Prices for
transportation grew 1.6% m/m in February (after increasing 1.0% in January),
mostly due to jumps in the cost of fuel and lubricants (+7.3% m/m) and railroad
tariffs (+1.9% m/m).

Housing and utility
services slid 1.8% m/m (after jumping 6.0% m/m in January). In particular,
prices for electricity declined 6.6% m/m. Prices for clothing and footwear
dropped 3.5% m/m (after falling 4.0% m/m in January).

Evgeniya Akhtyrko: Monthly inflation in February was
higher than ever before in previous years. We believe that the growth of food
prices was mostly the result of ever increased inflation expectations spiraled
by a jump in natural gas prices for households during previous months, growing
outlays for housing services and transportation.

The government decision “to fix” the price of
natural gas for households for February-March 2021 somewhat alleviated the growth of
the consumer basket cost in February. In addition, the prices for clothing and
footwear have been on a downward trend as the result of dwindling demand during
the pandemic.

We expect consumer
inflation to heat up in the upcoming months. Also, our expectations that the NBU will
again increase its policy rate at an Apr. 15 meeting (from
6.5% today) have more grounds now.