Turkish Inflation Rises Unexpectedly

Turkish inflation jumped to 14% in November on the back of higher food and transportation prices reflecting increasing cost-push factors, strong domestic demand, and sticky services inflation.

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Evolution of annual inflation (%)

(Core = CPI excluding energy, food & drinks, alcoholic beverages, tobacco, gold)

Source: TurkStat, ING 

Turkish inflation came in higher than expectations at 2.3% - the highest November figure, taking annual inflation to 14.03% from 11.89% a month ago.

On the other hand, core inflation maintained the upwards trend and reached 13.26% with another above-average monthly reading. The data reflects growing cost-push pressures, while the rise in FX volatility until recently is also a factor further complicating challenging inflation dynamics.

The breakdown shows a jump in annual goods inflation to 15.1% from 12.3% a month ago driven by food, durables and some core goods despite relatively benign energy, clothing and alcoholic beverages & tobacco prices and a strong services inflation driven by catering services, while rent inflation aligned with long-term November average, limiting the upside move.

Turkish inflation came in higher than expectations at 2.3% - the highest November figure, taking annual inflation to 14.03% from 11.89% a month ago

With 4.08% monthly change, the domestic producer price index (D-PPI) has maintained its rapid upwards trend and reached 23.1% from 5.5% a few months ago, showing the impact of the small base from the last year and growing producer-price-driven cost pressures on the inflation outlook with the adverse effect of a weak currency.

Regarding the main expenditure groups, food and transportation were the biggest contributors to the headline reading at 97bp and 72bp respectively.

For food, annual inflation jumped to 27% - the highest since mid-2019, driven by both processed and unprocessed foods. For transportation, higher motor vehicle and fuel prices pulled annual transportation inflation to 18.7% in November from 13.9%YoY in October. Other drivers of higher than expected inflation include monthly contributions from housing by 15bp, household equipment by 13bp and dining & lodging was 10bp.

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