Ukraine’s consumer inflation accelerated to 0.9% month-on-month in March from 0.5% m/m in February, driven mostly by the growth of prices for clothing and footwear, the nation's state statistics service Ukrstat reported on April 9.

Annual inflation stood at 8.6% year-on-year vs 8.9% y/y in February.

Clothing and footwear prices jumped 11.3% m/m after declining in the four previous months. Meanwhile, annual inflation for clothing and footwear was only 2% y/y.

Food prices grew 0.4% m/m in March (vs. 0.9% m/m growth in February), driven by vegetables (2.4% m/m), fruits (1.7% m/m) and bread (0.9% m/m). At the same time, egg prices dropped 5.0% m/m, and milk prices slid 0.6% m/m.

Prices for housing and utilities rose 0.3% m/m, driven mostly by price hikes for water and sewage expenses (1.9% m/m). In addition, transportation prices rose 0.5% m/m.

Core inflation (the consumer basket excluding goods and services with the most volatile prices) accelerated to 1.2% m/m growth in March from 0.2% m/m in February. Annual core inflation stood at 7.6% y/y vs 7.8% y/y in February.

Evgeniya Akhtyrko at Kyiv-based brokerage Concorde Capital wrote in a note on April 10 that the monthly jump in prices for clothing and footwear in March is typical in Ukraine (9.6% m/m in March 2018), related to seasonal changes in wardrobe.

However, this year’s jump turned out unexpectedly high considering the hryvnia's 1.1% appreciation in March should have offset rising prices for clothing and footwear in light of the high share of imports, she added.

The annual inflation of 8.6% y/y exceeded the quarterly forecast by the National Bank of Ukraine (NBU) of 8.4% y/y. This fact, coupled with increased political risks related to the presidential elections, is likely to undermine the central bank's intention to lower its key policy rate from 18% at its monetary committee meeting on Apr. 24.

Concorde forecasts Ukraine’s consumer inflation to slow to 6.7% YTD in 2019 (from 9.8% YTD in 2018).