Reality bites, now what?

TURKEY - Report 03 Jul 2020 by Murat Ucer

Consumer prices rose at a much higher than expected 1.1% in June, with the 12-month rate increasing sharply to 12.6%, from 11.4% in May, versus our forecast of just over 12%. Domestic-PPI inflation was 0.7%, m/m, with the 12-month rate also rising to 6.2% from 5.5% a month ago, reversing the downward trend of the past 4 months.

Looking at the contributions, the increase in 12-month CPI inflation was driven mainly by the transportation category, which made a 0.7 contribution to overall inflation this June vs. 0.1 pps last June, but contributions were greater than the same month of last year in quite a few other categories as well, such as clothing.

Quite surprisingly, food prices dropped by 1.6%, m/m, with the 12-month food inflation hence remaining flat at 12.9%, which was, also quite surprisingly, thanks to processed food prices, while unprocessed food inflation rose to 12.3% in June from 10.1% in May.

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