Inflation worse than expected on food

TURKEY - Report 05 Mar 2018 by Murat Ucer

Consumer prices rose at a higher than expected 0.7% in February (consensus: 0.5%; ours 0.3-0.4%), with the 12-month rate hence staying broadly unchanged at 10.3%, over a month ago. Producer prices rose, however, to 13.7%, from 12.1% reflecting a technical correction in electricity prices, but also suggesting cost-push pressures still remain elevated.

Our forecast slippage was mainly driven by our benign food price assumption (reflecting a technical mean reversion expectation of sorts), which, instead of easing modestly further, as we had assumed, rose back up to a 12-moth rate of 10.3%, from 8.8% in January. Food (and beverages) contributed 0.5 percentage points (pp) to February inflation this year, compared with a 0.2 pp contribution in the same month of previous year, as non-food inflation slipped into single digit territory, to just under 10% -- by our calculations.

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