Turkey: Annual Inflation Broadly Unchanged In January

CPI inflation was close to the market consensus in January at 1.06% while the annual figure came in at 20.35% vs 20.3% a month ago. The data shows the impact of food inflation despite price drops in clothing and housing.

Source: Flickr

A slight drop in goods inflation from 22.7% a month ago to 22.4% with contributions from core goods, unprocessed foods and a significant impact from energy despite a considerable increase in unprocessed food prices.After two months of decline, January CPI inflation data was broadly aligned with the market consensus (1.0%), coming in at 1.06%, while the annual figure inched up slightly to 20.35% from 20.3% a month ago. On a monthly basis, a benign reading in transportation and sharp drop in housing and clothing were offset by a jump in food inflation. Accordingly, we saw:

  1. A rise in sticky services inflation to 15.4% from 14.5% showing the effect of hikes in rents and communication services. Following a more broad-based disinflationary trend in December, January data showed a pause on this front.

Evolution of Annual Inflation (%)

Source: TurkStat, ING Bank

Annual core inflation has continued to recover from a peak of 24.3% in October, standing at 18.8% last month, as we saw continued price declines. This shows not only the impact of recent government actions i.e. a continuation of tax cuts in consumer durables and administrative price adjustments but also FX pass-through running its course, with sharp strength in the Turkish lira in recent months.  

The Domestic Producer Price Index (D-PPI), on the other hand, stood at 0.45%, pulling annual inflation down further to 32.9% from 33.6% a month ago. PPI, which has fallen from a peak of 46.2% in September, shows continued improvement though still remains elevated.

Contributions to annual inflation (ppt)

Source: TurkStat, ING Bank

Among 12 major expenditure groups:

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