Inflation approaches 80%

TURKEY - In Brief 04 Jul 2022 by Murat Ucer

Consumer prices rose by 5%, m/m, in June, broadly in line with the market consensus, with the 12-month rate thus rising further to 78.6% from 73.5% in May -- the highest level since September 1998. Producer prices also rose sharply by 6.8% in the month, taking the 12-month PPI-rate to 138.3% from 132.2% in May. Meanwhile, the PPI-CPI inflation gap slightly increased further to just under 60 percentage points (pps), suggesting that cost-push pressures continue unabated (Graph 1; Table 1).

The increase in 12-month CPI inflation was driven mainly by 3 sub-categories: transportation, housing and food and beverages, while some categories like houseware, clothing and shoes, somewhat surprisingly, contributed less to overall inflation this June vs. last June (Graph 2). Then again, our diffusion index (now calculated based on the new, narrower set of average prices) remains at historically high levels (Graph 3).

Twelve-month food inflation continued to rise -- to 93.9% from 91.6% a month ago – but this was driven by a sharp jump in processed food inflation, which more than offset the decline in unprocessed food inflation (Graph 4).

Both popular core inflation indices (B- and the C-indices), as well as service inflation continued to increase as well in 12-month terms. Core inflation as measured by the B-index rose to 64.4% from 61.6% while as measured by the C-index, it rose to 57.3% from 56% (Graph 5; Table 2). Service inflation stood at 48.7% in June, up from 45.8% in May, driven by hospitality and transportation services, despite some categories such as rents, remaining surprisingly subdued, relatively speaking (Graph 6).

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