Inflation drops sharply, mostly on food

TURKEY - Report 03 Jul 2019 by Murat Ucer

Consumer prices were almost unchanged in June, m/m (0.03%), which was a slightly better print than the consensus -- of 0.1%-0.2% increase. The 12-month CPI-inflation thus fell quite sharply to 15.7% from 18.7% in May. Likewise, the 12-month D-PPI inflation dropped to 25% from 28.7%, with the spread between the two indicators nevertheless persisting around an elevated 9 percentage points or so (ppts).

Although non-food inflation also eased to 14.4% in June from 15.2%, y/y, in May (our calculations), the sharp drop in CPI-inflation was mainly driven by the food category, with food inflation dropping by almost 9 pps to 19.2%, y/y, from 28.4% in May. This drop, in turn, was driven by unprocessed food inflation, which eased by a massive 20 pps or so to 15.3% in June, while in contrast -- and interestingly, processed food inflation, edged up somewhat to 23.4% in June, up from 22% in May.

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