Macro Flash Note: Inflation

CPI in Oct driven by milk&bread prices


State statistics committee has published the data on CPI&PPI in October. CPI grew by just 0.5%, that is quite low figure given the current macroeconomic conditions. In y/y terms the inflation growth decelerated from 10.5% to 10.1%.
The largest prices growth was demonstrated by milk (+4.7%) and milk products (cheese and butter, +5.8% and +5.3% respectively) and derived from respective price growth in diary production by 4.5%. This is likely to be stopped in November as last week Antimonopoly Committee of Ukraine required that 11 largest diary producers should gradually decrease their selling prices.
The smaller than in previous years harvest of grain resulted in prices growth for bread (+1%), bread products (+1.2%) and paste goods (+2%). Also the price for alcohol&tobacco goods rose by 1.6%.
In November-December CPI is expected to be fueled by seasonal factor (New Year celebration approaching), growing imports and slight UAH depreciation. Also we expect high PPI to be gradually translated into the increase in consumer prices. Our forecast for CPI in November is 0.9% m/m.

PPI in October grew by 2.4% m/m that corresponds to 19.8% y/y. Processing industry faced faster prices growth (+2.1%) than extracting industry (+1.0%) due to chemical production (+4.3%), metallurgy (+2.5%) and food production (+2.4%). The notable increase was also seen in prices for production and distribution of gas, water and electricity by 4.5%.