Turkey | CPI surprised on the upside with 36.1%

Summary

Consumer prices increased by 13.58% in December significantly above expectations resulting in an annual inflation of 36.1% up from 21.3% the month before. We expect consumer inflation to hover above 40% throughout the year before declining to near 30% at the end of the year, helped by the favorable base impact in December.

Key points

• Key points:
• Food inflation recorded a record level of acceleration on the back of 15.5% unprocessed and 16.5%processed food on a monthly basis, (annual figure jumped to 44.7% from 27.5%.)
• Energy prices recorded 9.8% mom and, 42.9%yoy, on the back of currency depreciation followed by the series of price hikes which will keep the negative outlook given the final price hikes.
• Sharp currency depreciation and worsened expectations seemed to lead exchange rate pass-thru to core inflation to reach historical high level even considering 2018 crisis.(Core C 13.23% mom and 31.9% yoy).
• Cost push factors reached a record high level of 19 years, 19.1% mom, and 79.9% yoy and will continue to strengthen in January given the strong price hikes applied to industry.
• All in all, high currency depreciation, high cost push factors accompanied with high demand and worsening expectations (also supported by the recent acceleration in credit growth and brought-forward demand), and continuing supply side problems risks remain clearly on the upside for inflation outlook.

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