Ukraine consumer prices drop 0.5% m/m in June

Ukraine’s consumer inflation declined 0.5% m/m in June
after rising 0.7% m/m in May, due to price decreases for food, clothing and
footwear, and communal services, the State Statistics Service reported on July
9. Annual inflation slowed to 9.0% yoy from 9.6% yoy in May.

Food prices declined 1.1% m/m in June (vs. 1.0% m/m
growth in May), driven by eggs (-26.7% m/m), vegetables (-14.3% m/m) and milk
(-1.2% m/m). At the same time, prices for fruits jumped 9.3% m/m, prices for
sugar increased 6.7%% m/m, and bread prices grew 1.4% m/m.

Prices for clothing and footwear continued to decline,
losing 3% m/m (after 1.5% m/m decline in May). In addition, prices for housing
and communal services dropped 1.4% m/m (vs. 0.7% m/m decline in May) driven by
lower natural gas price for households (-6.7% m/m).

The price decline was restrained by a 1.2% m/m growth
of prices for alcohol and tobacco. In addition, prices for transportation
increased 0.3% m/m due to a jump in prices for railroad services.

The core inflation index (the consumer basket excluding
goods and services with the most volatile prices) did not change in June (vs.
0.2% m/m growth in May). Annual core inflation stayed unchanged at 7.4% yoy.

Evgeniya Akhtyrko: The seasonal
drop in some food prices eased inflation pressure in June. In addition, the
decrease of the administratively regulated tariff for natural gas resulted in a
decline of prices for communal services.

We expect the deflation of consumer prices to
continue in July, driven mostly by an enlarged food supply. The appreciation of
the national currency will also contribute to price cooling, making imported
goods less expensive. According to our forecast, consumer prices will increase
7.4% YTD in 2019 (vs. 9.8% YTD in 2018).