Inflation drops on food prices

ISTANBUL- Hürriyet Daily News

Economy Minister Çağlayan throws a tomato to a person not pictured here. The minister expects fall in inflationb. AA photo

Turkish annual inflation decelerated more sharply than forecast to 8.28 percent in May from 11.14 percent in April, while its producer price index (PPI) increased 0.53 percent, according to data released yesterday by the Turkish Statistical Institute (TÜİK).

The consumer prices index (CPI) was 7.17 percent in the same month last year; similarly, May PPI fell to 8.06 percent from 9.63 percent in May 2011.

On a 12-month average, annual inflation came in at 8.68 percent while PPI finished at 10.57 percent. The 8.68 percent figure marked the first time that the consumer prices had fallen to single digits since November 2011.

After the data was released, Economy Minister Zafer Çağlayan said that he anticipated that inflation would drop even more in the coming months and that the decrease in petrol and real estate prices had played a large role in the outcome.

Alcoholic beverages and tobacco registered the highest jump in inflation from May 2011 with an 18.7 percent increase. Various products and services followed with a 15.15 percent increase, while residential housing rose 12.54 percent, household goods increased 9.89 percent, hotel prices hiked 9.43 percent and clothing and shoes went up by 8.58 percent.

In terms of PPI, the agricultural sector witnessed a 3.65 percent increase on a monthly basis – a 7.72 percent increase from May 2011 and 3.96 percent increase on a 12-month basis. The industrial sector, however, witnessed a 0.12 percent decrease on a monthly basis. Compared to May 2011, the industrial sector registered an 8.13 percent PPI increase and a 12 percent increase on a 12-month basis.

EFG Istanbul’s Chief Economist Haluk Bürümcekçi said the fact that the inflation figure was slightly lower than expected was because of unprocessed food prices.

“Last year this group saw a 9.8 percent increase, but this year there was a 5.4 percent drop,” he said. He added that the inflation data would not at this juncture change the Central Bank’s policy stance.

Seasonal differences
Istanbul’s Fruit-Vegetable Commission and Merchants Association Head Burhan Er attributed the drop in vegetable prices to the erosion of seasonal differences between the different regions in Turkey and the sudden spike in production with the commencement of the planting season.

The regions in Turkey with the greatest price increases on a yearly basis as of May were Kırıkkale, Aksaray, Niğde, Nevşehir, Kırşehir, Adana, Mersin, Hatay, Kahramanmaraş and Osmaniye – all regions in Central Anatolia and Turkey’s south. On the other hand, the regions that witnessed the smallest price increases were Kocaeli, Sakarya, Düzce, Bolu, Yalova, Zonguldak, Karabük and Bartin in northwestern Turkey and the western Black Sea region.

Speaking to the “Marco-economic Stability: Challenges Ahead” conference yesterday, Central Bank Gov. Erdem Başçı said the government would need to develop and implement new policies to achieve macro-economic and financial sustainability, given the global economic crisis.

“May data should help restore the credibility of the Central Bank of the Republic of Turkey and its unorthodox policy mix in a significant way,” Yarkın Cebeci, economist at JP Morgan Bank in Istanbul, wrote in a note.