Ukraine CPI slows to 0.4% m/m in June

Ukraine’s consumer price growth continued slowing in June, rising just 0.4% m/m (57.5% yoy) compared to 2.2% m/m (58.4% yoy) in May, according to state statistics released on July 6. The main factor was food prices, which were flat in June compared to 3.1% m/m in May. At the same time, prices for utilities rose 1.2% m/m and education grew 1.5% m/m, respectively. Transportation prices sped up to 1.1% m/m compared to 0.2% m/m in May. Meanwhile, healthcare prices fell 0.1% m/m compared to 1.4% m/m growth in the prior month.

Alexander Paraschiy: Inflation is slowing in line with our projections. The hryvnia has stabilized and no further utility increases are scheduled for this year. Against this backdrop, we are keeping our view that the main inflation potential has already been released and we do not see many inflation surprises in the upcoming months. 

Still, the hryvnia’s potential weakening in 2H15, as well as higher food prices due to this season’s weaker-than-expected grain harvest, very likely will add more pressure closer to the year end. Also starting in October, we expect the utility prices, already hiked in April, to finally reach consumers, contributing to higher CPI. Therefore, we anticipate the relatively minor inflation currently to continue strengthen through the fall. By the year end, we project CPI to have risen 49.1% yoy (42.9% YTD).