Ukraine consumer prices drop 0.7% m/m in July

Ukraine’s consumer prices dropped 0.7% m/m in July owing
to food and clothing, whose prices declined for the third straight month, the
State Statistics Service reported on Aug. 9. Annual inflation slowed to 8.9%
yoy from 9.9% yoy in June.

The decline in food prices accelerated to 1.9% m/m
(after a 0.5% m/m decrease in June), mostly due to a seasonal decline in prices
for fruits (-11.1% m/m) and vegetables (-12.4% m/m). Prices for eggs (-7.6%
m/m) and milk (-1.1% m/m) also continued to decline. Clothing and footwear
prices decreased 4.6% m/m (after a 2.4% m/m drop in June).

Other consumer prices grew, led by alcohol and
tobacco, which added 1.8% m/m in July (after 1.6% m/m growth in June). Prices
for transportation increased 0.7% m/m (after 0.6% m/m in June). Utility prices
climbed 0.5% m/m, while prices for household durables inched up 0.2%.

Core inflation (the consumer basket excluding goods
and services with the most volatile prices) slid 0.1% m/m in July, after
staying flat m/m in June. Annual core inflation slowed to 8.8% yoy growth from
9.0% yoy in the previous month.

Evgeniya Akhtyrko: July’s
deflation, fueled by cooling prices for widely consumed foods, is a positive
surprise for the economy. It provides a “safety cushion” to get through the
fourth quarter, when we expect consumer prices to swell again due to higher
utility bills (especially natural gas and heating prices) and a seasonal
decrease in food supply.

Given the current price trend, our projection of
consumer inflation at 8.9% YTD, or 11.8% yoy in 2018, looks quite attainable.