[aaus-list] FW: Ukraine: Huge food inflation surge in March (fwd)

[Max Pyziur]

fyi,


MP
pyz at brama.com

---------- Forwarded message ----------
Date: Mon, 7 Apr 2008 06:44:59 -0400
From: "Leven, Ronald (Research)"
To: Max Pyziur <pyz at brama.com>
Subject: FW: Ukraine: Huge food inflation surge in March

Ronald Leven, Executive Director
Morgan Stanley | Research
1585 Broadway, 3rd Floor | New York, NY  10036



________________________________

From: Weeks, Oliver (Research)
Sent: Monday, April 07, 2008 5:19 AM
To: emx; ciseconint; fxnews; emeares
Subject: Ukraine: Huge food inflation surge in March



Ukrainian inflation in March rose 3.8% to 26.2% year on year, far above
our and market expectations (24.0 and 23.8% respectively).  The rise was
driven largely by food prices, 55% of the consumer basket, which
accelerated to 40.7%Y.  Fruit prices were up 16.7% on the month and meat
up 8.9% on the month.  Also standing out were fuel prices, up 8.2% on
the month.  While price rises in the rest of the basket are subdued -
CPI ex-food and petrol up just 4.9%Y on our calculations - the dominance
of food in the basket makes such core calculations unusually unreliable.
Household electricity and gas prices remain flat year on year, well
below cost-recovery levels and a source of pent-up inflation.  Household
credit growth was still up 99% year on year in March.


With this release inflation will inevitably rise even higher up the
political agenda.  Inflation in Q1 alone, 9.7%, is now above the
government's official 9.6% target for the whole year.  The industrial
PPI accelerated from 25.6%Y to 31.7%Y.  We believe the government is
genuinely quite focused on restraining inflation, within the constraints
of its lack of a parliamentary majority and the priority given to paying
out Savings Bank compensation.  The domestic money market has tightened
sharply following February's aggressive hikes in prudential requirements
by the National Bank of Ukraine.  The head of the NBU council, Petr
Poroshenko, indicated on Friday that the Bank is planning further hikes
in reserve requirements on unsecured consumer credit.  The government's
57 point anti-inflation plan promises a mixture of price regulation with
market liberalization, and in its most recent version cuts the 2008
general government deficit target to 1.2-1.5% of GDP, from 2.0%
originally planned and 1.1% in 2007.  New restrictions on food exports,
as just indicated by Kazakhstan's prime minister, may be next on the
agenda.  Much will clearly depend on this year's grain harvest, for
which early official forecasts are around 30% up on 2007's very poor
result.  Nevertheless inflation looks likely to go through 30%Y by May
and December CPI now looks likely to be closer to 21%Y than our previous
19% forecast.



Ukraine: Inflation keeps accelerating




Oliver Weeks
Morgan Stanley | Research
20 Bank Street | Canary Wharf | Floor 03
London, E14 4AD
--------------------------------------------------------