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4.2.1 CPI dynamics
DATA CRUNCH: Turkish inflation inches down. Turkey’s annual consumer price index (CPI) inflation edged down to 18.71% in May from 19.50% y/y in April, the Turkish Statistical Institute (TUIK) said on June 3. The official inflation rate in May was thus recorded at its lowest point since last August’s 17.9%. The official data suggests that the latest bout of lira depreciation did not negatively impact inflation. In the run-up to the inflation data release, a Bloomberg poll predicted headline inflation for the fifth month of the year would come in at 19.3% y/y. The official inflation data for May also showed that food inflation, which takes the biggest weighting in Turkey’s CPI basket at 23.29%, saw a substantial decline of 1.18% m/m, bringing the annual food inflation increase to 28.44% from 31.86% y/y in April. It is curious that when fresh vegetable prices boom during the winter months they do not have a significant affect in the headline CPI, but when they fall during the spring the impact is felt in the indicator. Listed inflation for alcoholic beverages and tobacco—which only account for a 4.23% basket weighting—jumped again, from 9.66% y/y in April to 19.22% y/y in May. Big tax hikes caused that impact in the official figures, just as the pressure from food inflation eased. Official healthcare prices rose at an annual rate of 19.37% in May compared to 19.75% in April. The health ministry last month hiked the fixed exchange rate for imported pharmaceutical products by 26.4%. Healthcare prices have the second lowest basket weighting, of 2.58%. Official transportation prices, which have the second largest basket weighting of 16.78%, rose by 12.40% y/y, lower than the 12.55% y/y seen in April, while official housing and utilities prices, which have the third largest basket weighting, of 15.16%, rose 14.68% y/y, down from the 15.31% y/y recorded in the fourth month. The average prices of 48 items in TUIK’s inflation basket of 418 items remained unchanged in May while those of 267 items increased and those of 103 items decreased. It is notable that the official data points to widespread rises in CPI basket item prices but the impacts do not show through in the headline inflation figure. “The weaker-than- expected Turkish inflation figures for May, combined with the recent rally in the lira, means that the monetary policy committee will continue to shift away from its hawkish stance at this month’s policy meeting [to be held on June 12]. But with a number of flashpoints on the horizon for the currency in the coming weeks, including the upcoming Istanbul mayoral election [revote after the annulling of the opposition’s end-of-March victory], there is little scope for policy easing,” Jason Tuvey of Capital Economics said in a research note.
28 TURKEY Country Report June 2019 www.intellinews.com