Ukraine’s consumer prices were almost unchanged in July, inching down 0.1% m/m (+7.9% y/y) compared with a 0.2% m/m (+6.9% y/y) rise in the prior month, according to state statistics released on Aug. 8. For 7M16, CPI increased 4.8% YTD.
Ukraine cut borrowing costs for a fourth month in July as inflation continued to ease and the hryvnia reached its strongest level since January. The central bank lowered its key policy rate to 15.5% from 16.5%.
The key factors for the July fall were declining prices for food (-0.9% m/m) and clothing & footwear (-3.5% m/m). Growth slowed for prices in healthcare (+0.2% m/m vs. +0.3% m/m in June), transportation (+0.4% m/m vs. +1.2% m/m in June) and education (+0.5% m/m vs. +1.1% m/m in June). At the same time, utility rates sped up to +1.7% m/m (+0.1% m/m in June), partially reflecting an increase in heating rates (+8.1% m/m), Concorde Capital reports.
Alexander Paraschiy, an analyst for Concorde, commented: “July CPI is exactly what we estimated. Decreasing m/m food prices is a seasonal trend for the summer months. The strong hryvnia this summer has also contributed to the deflationary trend, particularly in the case of falling prices for clothing and footwear. Still, we expect inflation to speed up starting September on the back of a near 28% increase in electricity rates. By October, doubled heating rates (as of July 1) will begin to affect household budgets, adding extra pressure on consumer prices. Since these tendencies are in line with our expectations, we are keeping our initial CPI forecast unchanged at 10.5% YTD (+14.5% yoy) for 2016.”