April Inflation Broadly As Expected

TURKEY - Report 03 May 2017 by Murat Ucer

Consumer prices rose by 1.3% in April, broadly as expected, taking the 12-month rate up to just under 12% (11.9%), from 11.3% in March. Likewise, 12-month producer prices rose further to 16.4% in April, from 16.1% a month earlier, suggesting cost push pressures continue (Table 1; Graph 1). The somewhat good news is that core inflation eased slightly to 9.4% from 9.5% in March, and might have peaked just short of double digit rates, contrary to our expectation, largely owing to recent lira stability and possible to a methodology change in the calculation of clothing inflation (Table 2; Graph 2). Food inflation that rose to a 12-month rate of 15.6% is largely to blame in driving headline CPI higher, while non-food inflation has eased somewhat to 11.1% in April from 11.4% a month earlier (Graphs 3-4). All this being said, underlying stickiness in inflation continues, as most vividly attested to by service inflation, which rose to 8.9%, from 8.6% in March (-- and hovers at an annualized rate of some 9% by our calculations) (Graph 5).

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