Turkey | Consumer inflation decelerates to 11.76%

Summary

Consumer prices increased by 0.58% in July, this time surprising on the downside (1% BBVA Research vs. 0.8% Consensus). Led by the positive base effects, annual inflation decelerated to 11.76% from 12.62% in June. We expect consumer inflation to stay at two-digits and to be realized at 10% at the end of the year

Key points

• Key points:
• Our main deviation stemmed from a much more rapid seasonal decline in food prices and tobacco prices staying constant despite the recent tax hike.
• Core prices moved in line with our expectations, showing a deceleration to 10.25% in annual terms, after the huge price adjustments in the previous two months
• Sub-items sensitive to demand and exchange rate pass-thru, and second-round price effects still keep the inflationary pressures alive.
• We expect the headline inflation to show a declining pattern from now onwards but with a decelerated disinflation path due to both supply side effects and demand pull factors
• We now expect consumer inflation to stay at two-digits and to be realized at 10% at the end of the year.

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