October inflation: a relative moderation

TURKEY - In Brief 05 Nov 2018 by Murat Ucer

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Consumer price inflation came in at 2.7%, m/m, in October -- higher than the market consensus of around 2%, m/m -- with the 12-month rate hence rising further to 25.2%, from 24.5% in September. Domestic-PPI inflation was 0.9%, which meant a moderate decline in the 12-month rate to 45%, from 46.2% in September. Food, housing and houseware sub-categories made larger contributions to CPI-inflation this October, compared to the same month of last year, but price pressures, naturally, were less broad-based than they were in September (Table 1: Graphs 1-2).As for the underlying indicators, annual core inflation (the C-index) rose further -- for a sixth consecutive month -- but the rate of increase was more subdued this time, with the 12-month rate rising by 0.3 pp to 24.3%, from 24% in September. Monthly core inflation (seasonally adjusted) also declined in October to 1.3% (our calculations), after September’s dramatic 6.9% increase. These developments in core inflation appear chiefly driven by the strengthening of lira in October (Graphs 3-4). The increase in 12-month non-food inflation, by our calculations, was also somewhat more moderate, rising to 23.6%, y/y, from 23.2% in the previous month (Graph 5). But service inflation rose somewhat more significantly -- to 14.8% from 14% a month ago -- in what looks like a fairly broad-based increase, which probably reflects a lagged adjustment by the sector to cost-push pressures of recent months (Graph 6; Table 2).Net/net, despite being higher than consensus, today’s inflation print points to a relative moderation of sorts in inflation pressures after a hellish September. Assuming lira remains broadly stable in the coming months,...