Ukraine’s Headline Inflation Slows to 8.8% in February

19 Марта 2019
 

News
Ukraine’s State Statistics Committee (UkrStat) reported that rolling 12-month consumer inflation slowed to 8.8% YoY in February from 9.2% YoY in January, according to official data released earlier this month. UkrStat said that CPI inflation during the month of February alone was 0.5% MoM. For 2M18 (a slightly different measurement of full-year inflation than the 12-month rolling figure) the CPI index growth was 9.0% YoY.


Commentary
The decline in headline consumer inflation in Ukraine in February was less then expected as food prices demonstrated a 0.9% MoM increase. In particular, bread prices rose by 1.2% MoM, bringing an overall increase of 20.4% YoY amid higher global grain prices.
In the main consumer basket categories, the highest price growth in February was registered in vegetables (+6.6% MoM) due to higher import costs for vegetables from Turkey, and in railway passenger services (+5.1% MoM). Food and beverage prices rose 0.9% MoM in the period. Meanwhile, the utility service category, which has contributed the lion’s share of overall inflation in Ukraine in recent years, edged up 0.5% MoM in February.
For March, we see no reason for inflation acceleration, and we project that the CPI will increase by 0.2% MoM, which would imply a slowdown in 12-month “headline” inflation from 8.8% to 8.3%.
One of the important factors for slower inflation pace in Ukraine is the strong hryvnia which has gained 2.5% against the dollar since the beginning of the year. In a year-on-year comparison, the hryvnia/dollar exchange rate weakened by 2.3% to 27.03 UAH/USD compared to 26.40 UAH/USD seen last March. Of course, political instability always increases pressure on the hryvnia, and it remains to be seen how the upcoming presidential election will play out.


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