ANKARA: A surge in food prices pushed Turkey’s annual inflation up to a four-month high in June prompting expectations that the easing cycle might be nearing an end. Consumer prices rose by 7.64% y/y in June, accelerating from 6.58% in May, data from the statistics office TUIK showed on July 4. The reading exceeded market expectations as analysts were looking for a 6.94% annual hike in a Bloomberg survey. On a monthly basis, prices edged up 0.47% from May, also beating the market consensus of 0.12%.
The main culprit was food prices that increased 1.16% m/m, adding 0.27pps to the headline inflation. Clothing prices were down 1.33% m/m, shaving 0.1pps off the headline inflation, while transport costs increased 0.67%, adding 0.09pps. The central bank already warned about a possible “correction” in food prices, but the 1.2% increase was probably larger than what analysts had expected. During Ramadan, on the other hand, demand for food products generally increase and this can partially explain the 1.2% food inflation in the month.
The core inflation index, which excludes more volatile food, gold, non-alcoholic beverages and tobacco products, increased 0.24% m/m in June, slowing from the 1.4% rise in the previous month. Annual core inflation, consequently, eased to 8.67% from 8.77%. TUIK also reported that producer prices rose 0.41% m/m in June, to follow a 1.48% hike in May. The annual increase in producer prices accelerated to 3.41% from 3.25%.
