Turkey’s consumer inflation rises on alcohol, cigarettes

ANKARA – Anadolu Agency

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Turkey’s annual consumer price inflation rate climbed beyond expectations in July, led by a surge in alcoholic beverages and food prices.        

The annual inflation rate was 8.79 percent in July compared with 7.64 percent in June, the Turkish Statistics Institute (TÜİK) said on Aug. 3.

The median estimate rate forecast was 8.23 percent, according to Anadolu Agency’s Finance Desk survey of economists.        

Monthly inflation increased by 1.16 percent in July from the previous month, TÜİK said.    
    
Alcoholic beverages and tobacco prices rose to an annual 19.36 percent through July, compared with 12.80 percent in June.        

Food prices also went up to an annual 9.69 percent in the month.        

The clothing and footwear sector saw the highest monthly decrease with a 4.14 percent fall.

“Inflation rose, both on a monthly and yearly basis, in July to a six-month high,” said Gizmen Nalbantlı, an Istanbul-based analyst at Işık FX.

“The effect of the minimum wage level raise and the depreciation of the local currency [Turkish Lira] will probably lead the inflation number to 8 percent as of December 2016,” Nalbantli said.        

“The rise is mainly driven by the increase in unprocessed food and cigarette prices,” Finansbank said in a client note.

“Looking ahead, food inflation may remain high due to the removal of Russia’s sanctions on Turkey’s exports,” it added.        

Moreover, if the recent currency depreciation continues it will create fresh upside pressures on consumer prices and deteriorate the main trend of the core indicator, Finansbank added.        

Turkish Central Bank Governor Murat Çetinkaya said on July 26 the inflation rate would fluctuate between 6.6 percent and 8.4 percent throughout 2016.        

 “The midpoint in 2016 will be 7.5 percent and 6 percent in 2017,” Çetinkaya had said.        

The Central Bank had cut the overnight lending rate by 25 basis points to 8.75 percent while it kept its benchmark one-week repo rate on hold on July 19 after a failed coup attempt on July 15.        

In its quarterly inflation report released on July 26, the bank said inflation was higher in the second quarter of the year due to energy prices and food prices.  

The lira lost value against the U.S. dollar upon the inflation data, trading 0.65 percent lower at 3.01 per dollar at around noon.