Turkey’s consumer price index drops in June

ANKARA - Anadolu Agency

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Inflation in Turkey dropped sharply in June with decreasing food prices, the Turkish Statistical Institute (TÜİK) stated on July 3, but analysts doubt that a further decline is in store. 

The Consumer Price Index dropped 0.51 percent in June from May, bringing the annual inflation rate to 7.20 percent in June from 8.09 percent in May.

The decrease was greater than analysts had forecast, as 21 economists surveyed by Anadolu Agency had predicted inflation would fall to 7.55 percent in June.

The highest monthly decrease was in food and non-alcoholic beverages at 2.79 percent. This area has been the key driver of inflation pressure this year, according to the Turkish Central Bank.

On a monthly basis, the cost of recreation and culture saw the highest price increases, with hotels, cafes and restaurants up 1.09 percent.

“Despite the decline in headline inflation, the core inflation rate, which does not include food and energy, should continue to remain elevated through the end of the year,” economist Attila Yeşilada of Global Source Partners said in an interview.

“The consumer price index data will be decisive for Turkish assets. The reason is hidden in the seasonal pattern of inflation,” commented Bora Tamer Yılmaz, an economist with Ziraat Securities in Istanbul, in a note published on July 3.

“So far in the first five months inflation has overshot its historic pattern due to food prices. Finally, after almost one-and-a-half years, food inflation has started to behave on the back of favorable weather conditions,” Yılmaz added.

“Historically, June matters the most for year-end food inflation. Because on average in December prices are 6.4 percent higher compared to June. Therefore, if in June food prices revert to their historic level of 0.77 percent year-to-date inflation, year-end food inflation may edge up to 11.2 percent. That’s 2.2 percent higher than the Central Bank foresaw in its latest inflation report,” he said.