Ukraine’s consumer prices accelerated to 1.8% m/m in January from 0.9% m/m in December. However, the annualized inflation rate remained on a downward trend, slowing to 11.1% last month from 12.3% in December. Consumer inflation in January was driven by prices for food products, which added 3.2% m/m. Among individual food items, sugar prices surged the most (up 14.7% m/m, up 107.7% y/y) tracking the global commodity market trend. Producer prices were up 1.9% m/m in January (vs. 1.0% m/m in December), implying annualized growth of 16.3%. All sectors showed growth, while the food industry posted the highest price increase at 2.9% m/m.

BG Capital: We expect annual inflation will remain close to January’s level in 1H10, however, it is set to accelerate in 2H10 as the government will be forced to raise household utility tariffs. Additionally, the post-crisis recovery of soft commodities prices worldwide will place more pressure on consumer prices in Ukraine.