Türkiye | July CPI lower than expected

Summary

Consumer prices rose by 2.37% in July, once again below market consensus (2.6%) and our expectation (4%), which led to an annual inflation of 79.6%. We expect consumer inflation to accelerate above 90% in the coming months before slowing down to near 70% given positive base effects in the last two months of the year.

Key points

• Key points:
• Food prices continued to rise in July by 2.9% mom and 94.5% yoy but still surprised to the downside on top of unprocessed food prices, particularly fresh fruit and vegetable prices.
• Energy prices fell for the first time since April 2020 by 3.1% mom on the back of a sharp decline in fuel prices during the month and annual energy inflation declined to 129.3%.
• Core prices kept increasing but only moderately with 3.45% mom and 61.7% yoy levels despite the depreciation pressure of the currency and deepening cost push factors due to strengthening producer prices.
• Domestic producer prices reinforced cost push factors by picking up 5.2% mom and 144.6% yoy, resulting in a wider deviation from consumer prices.
• Ongoing solid levels of domestic consumption led by continuing credit impulses and other loose economic policies, particularly wage adjustments, keeps demand pressure high on consumer prices.

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