Turkey | June CPI reinforces a worsening outlook

Summary

Consumer prices increased by 1.13% in June, remaining significantly above both the consensus and our expectation (0.6% vs. 0.45%). Thus, also led by the negative base effects, annual inflation accelerated to 12.62% from 11.39% in May.

Key points

• Key points:
• The upside surprise stemmed from the core prices whose annual inflation rose to 11.64% in contrast to our deceleration expectation led by the current weak demand.
• The increase in unit costs due to low capacity in certain sectors and the recent credit expansion especially in the consumer segment seem to weigh more.
• Energy prices started to correct faster than expectations since May, it continued to push the headline on the upside.
• Food inflation, this month, helped the overall inflation by staying stable in annual terms.
• All in all, despite the negative output gap (though with the elimination of deepening pressures), the above-mentioned factors and today’s data create upside risks on our current year-end inflation forecast (8.5%).

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