Inflation jumps on hike in gas, electricity prices

ISTANBUL - Hürriyet Daily News

Power lines are seen at a suburban Istanbul neighborhood in this file photo. An April hike in electricity and natural gas prices has started to affect overall inflation. DAILY NEWS photo, Hasan ALTINIŞIK

Consumer price inflation accelerated to 11.1 percent in April compared with the same month last year, hitting a nearly two and a half year high, official figures showed yesterday.

The figure rose by 1.52 percent from the previous month. Consumer price inflation expectation had been 0.95 percent for April, according to the Central Bank’s survey.

The rate was 10.43 percent in March and February, 10.61 percent in January. The last time consumer inflation surpassed 11 percent was in October 2008 when it was 11.99 percent. The alcohol and tobacco price increased the most on a year over year basis, with a 18.53 percent rise. These prices have been steadily registering high inflation figures, particularly during the last few months.

Energy prices

The inflation figures show that electricity and natural gas prices, which were raised 9.26 percent and 18.72 percent respectively as of April 1, have started to affect overall prices.

“In terms of consumer prices index component breakdown, the dominant driver reflecting the energy price hikes was housing, water and electricity (13.1 percent), but we saw higher inflation across most other categories as well, including food and non-alcoholic beverages (11.7 percent), clothing and footwear (11.7 percent), health (1.3 percent) and communications (1.8 percent),” said TD Securities in a research note.

“The spike in inflation in April was well signaled in the last Central Bank statement and minutes, which noted that the flexible monetary policy was likely to remain tight in the coming period in order to manage the upside to inflation in the short term,” the note said.

Inflation will peak in April before falling rapidly, Central Bank Gov. Erdem Başçı said in a presentation to the Cabinet May 2.

The tomato was crowned inflation champion with a 44.06 percent increase, while honey was at the other end of the inflation range with only a 1.37 percent increase.

Producer prices inflation continued to decline, extending the downward trend by falling from 8.2 percent year-on-year to 7.7 percent, which is a sign that consumer price pressures could resume their downward trend according to TD Securities. The monthly increase was at 0.08 percent.

The producer prices inflation decrease was mostly based on the agriculture sector, where the inflation rate fell to 1.9 percent from 6.2 percent. But the industry inflation rose from 8.7 percent year-on-year to 8.9 percent.

As for 12 month averages, annual inflation was 8.59 percent in consumer prices and 10.72 percent in producer prices.

Finansbank Chief Economist İnan Demir said a downward trend in inflation was likely after May, although it was not certain for June. Demir said he did not expect overall inflation to drop to 6.5 percent, as the Central bank estimates.