Consumer inflation spikes 1.3% m/m in January, above expectations

UKRAINE - In Brief 10 Feb 2022 by Dmytro Boyarchuk

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Consumer inflation was reported +1.3% m/m or +10.0% y/y, which is almost twice faster than we expected for January. Twice-stronger food prices (+2.5% m/m in January vs. +1.2% m/m we estimated) on the back of an upsurge in prices for vegetables (+20.5% m/m) was the main reason for that strong consumer inflation through the month. At the same time, all other CPI contributors are close to our initial projections. Remarkably, core inflation inched up by modest +0.1% m/m or +7.6% y/y through the month, demonstrating how accidental the January spike in food prices was. We still anticipate consumer inflation to lose steam through the course of 2022. However, the strong CPI jump in January outlines a consumer inflation trajectory above 7% YTD and above 8% y/y in 2022 even without heating and natural gas tariff adjustments. We are currently updating our macro-forecast for 2022-2023. In our base-case scenario we assume no heating tariff adjustments over the forecast period. The populist behavior of Volodymyr Zelenskiy and his surrounding advisers offers little chance for any painful moves for the voters, especially so close to presidential elections. We project CPI to increase by +7.1% ytd or +8.1% y/y in 2022.