Ukraine consumer prices rise 1% m/m in April

Ukraine’s consumer inflation accelerated to 1.0% m/m
growth in April after rising 0.9% m/m in March, driven mostly by prices for
food and clothing, the State Statistics Service reported on May 8. Annual
inflation accelerated to 8.8% yoy from 8.6% yoy in March.

Food prices grew 1.4% m/m in April (vs. 0.4% m/m
growth in March), driven by vegetables (12.6% m/m), meat (1.2% m/m) and bread
(0.8% m/m). At the same time, egg prices declined 11.1% m/m, fruit prices
dropped 1.0% m/m, sugar prices sild 0.5%.

Clothing and footwear prices increased 1.9 m/m after
surging 11.3% m/m in March. In addition, prices for transportation rose 1.0%
m/m (after staying flat in previous month) mostly due to growth in the prices
for gasoline.

Core inflation (the consumer basket excluding goods
and services with the most volatile prices) slowed to 0.4% m/m growth in April
from 1.4% m/m in March. Annual core inflation slowed to 7.4% yoy from 7.6% yoy
in March.

Evgeniya Akhtyrko: April’s
surge in vegetable prices was mostly due to a seasonal decline in which goods
from the prior year’s harvest runs out while the offerings of the new harvest
are weak. Nevertheless, such a situation points to the overall weakness of
Ukraine’s economy when seasonal problems in the supply of one item can cause
significant price fluctuations, resulting in accelerated inflation.

The acceleration of annual inflation in April is
likely to affect the plans of Ukraine’s central bank on softening monetary
policy. Most likely, the National Bank of Ukraine (NBU) will abstain from
lowering its key policy rate until it observes a consistent declining inflation
trend in three-to-four consecutive months. The attainability of the NBU’s
forecast with consumer inflation of 6.3% YTD in 2019 is now in question as
well. Only significant disinflation in May-August might help to achieve this
goal.

We expect Ukraine’s consumer inflation to slow to 6.8%
YTD in 2019 (from 9.8% YTD in 2018).