Turkey : Turkey’s annual consumer price inflation rate has fallen for the first time since March—and sharply. November saw it fall 3.62 percentage points from October’s 15-year high of 25.24% to 21.62%, the Turkish Statistical Institute (TUIK) announced on December 3.
Respondents to a Bloomberg poll and a Capital Economics forecast had anticipated that the rate would turn out to be 23%.
Turkey’s volatile monthly inflation was in November negative for the first time since June 2017, at 1.44%. That marked the biggest monthly decrease since 1991, Fercan Yalinkilic of Bloomberg noted on Twitter, adding: “Again the y/y decrease in M1, M3 growth, showed that inflation would be around 20%.”
The Turkish lira (TRY) was trading at 5.2477 against the USD, weaker by 0.69% d/d, as of around 18:10 local time after a 3.43% d/d rise in the Brent oil price to $61.5 per barrel, taking the price to more than $60 once more and representing a blow to Turkey, a big energy importer.
Steep recession, scope for rapid disinflation
“[The fall in Turkey’s November inflation] shows the impact of a bit of orthodox monetary policy. Shame that the authorities did not do this much earlier in the year – like back in April/May. The real econ[omy] is now paying the price with a steep recession, albeit this creates scope for rapid disinflation,” Timothy Ash of Bluebay Asset Management said on Twitter.
As a confirmatory sign of an ongoing recession, the foreign trade shortfall contracted by 91% y/y to $604mn after falling in October by 94% y/y to the lowest monthly level since 2001, preliminary customs ministry data showed on December 1.
Turkey’s Purchasing Managers’ Index (PMI) for manufacturing in November slightly rose to 44.7 but remained in contraction territory, below the 50-level, for the eighth straight month since April, IHS Markit said on December 3.
Turkey’s economy will contract 1.4% y/y in Q4 and officially enter a recession—defined as two consecutive quarters of negative growth—in Q1 2019, a Reuters poll predicted in October.
“Headline, core and PPI all surprised on the downside. Shows impact of recessionary conditions plus newfound strength and stability of the lira,” Ash added in a note to investors.
Turkey’s policies have included the dismissal of the deputy TUIK director with responsibility for the inflation data along with a so-called all-out-war against inflation pushing the private sector to “voluntarily” cut prices of items included in TUIK’s inflation basket by 10% for two months, tax cuts, raids on onion warehouses, price controls, and encouraging local lenders to “voluntarily” cut interest rates.
Onion prices posted the highest monthly rise, at 51%, of all the components of the inflation basket in November.
