Türkiye | Weaker inflation realization in April

Consumer prices rose by 2.4% m/m in April, lower than both our expectation and consensus (2.6%, 2.7% respectively), whereas annual inflation came down to 43.7% from 50.5% on favorable base effects. We expect year-end consumer inflation to be 45%, assuming a manageable depreciation of the currency after the elections.

Key points

• Key points:
• Despite the seasonal impact and strong domestic demand, core prices (C index) increased lower than expected by 3.2% m/m due to weaker clothing prices inflation and muted realization in other basic goods (1.1% m/m).
• Energy prices contracted in monthly terms (-3.9% m/m) for the first time in the last four months on the back of the recent price reductions in electricity for all economic agents (15%) and the ease in fuel prices (particularly LPG).
• The deterioration in food prices was maintained by 4.1% m/m increase in April mainly due to the unprocessed food and fresh fruit and vegetables prices, which resulted in an annual figure of 53.1% down from 67.1%.
• The deterioration in services prices was broad-based with a monthly figure of 3.9%, led the cumulative services inflation in the first four months of the year to be 24.5%.
• Unanchored inflation expectations, strong inflation inertia and continuing cost pressures, which might be strengthened further by a high potential wage adjustment in July, keep upside risks on the inflation outlook alive.

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