Turkey | Consumer inflation reached 18.95% in July

Summary

Consumer prices increased by 1.8% in July, higher than expectations on the back of upside surprise in food prices resulting in an annual inflation of 18.95% (up from 17.53% the month before). We expect consumer inflation to stay close to 18.5-19% till November and end the year at 16% with the help of positive base effects.

Key points

• Key points:
• Food inflation surprised again on the upside stemming from both unprocessed food prices despite its negative seasonality and processed food inflation (5.6% and 2.6% respectively, annual figure reached: 25.5%).
• Utility and LPG price hikes weighed on consumer prices as monthly energy inflation realized as 6.2%.
• Core C inflation occurred relatively weaker (with 0.62% mom down to 17.22% yoy) which might be temporary given the limited deceleration in domestic demand, still deepening cost push factors and deteriorating inflation expectations.
• Domestic producer prices increased by 2.5%mom, thus reached 44.9% yoy and the gap between consumer and producer prices reached a new record, as cost push factors continued to deepen.
• This year’s drought besides losses on still continuing fires, and deepened cost-push factors will keep the risks on the upside for inflation outlook in the near term.

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